Corporation Tax Return Preparation

I. Title: Corporate Taxation

II. Introduction

Rano's tax file includes the following relevant facts:

▪ Incorporated as a regular “C” corporation on July 1, 2010 ▪ Address: 200 Bridge Street, Cleveland, Ohio 44111. ▪ EIN Number: 12-123456 ▪ It manufactures fishing gear ▪ Its Business Activity Code is 339900 for "other manufacturing

Key Financial Information

Total assets $15,000,000

Sales 3,000,000

Net Income “per Books” 840,000

Inventory, beginning 200,000

Inventory, ending 200,000

Purchases 1,200,000

Cost of Goods Sold 1,200,000

Inventory is valued at Cost using the FIFO inventory cost flow method

All non-inventory expenses are reported using the Cash basis method

Rano is owned by a single shareholder, Sam Fizer. His Social Security number is 333-55-3333. Last year, Sam’s salary as President was $300,000, salaries and wages paid to other Rano employees totaled $450,000. In addition, Rano paid $50,000 to rent its manufacturing plant, $100,000 to advertise, and $90,000 for repairs and maintenance.

Additional information included in Rano’s file for last year:

• Rano made four estimated tax payments of $25,000 last year. • Overpaid taxes by $14,000

o Carried this $14,000 forward as a credit, which is still available for use this year

• Rano contributed a truck it had used in its business for the past 4 years to St. Chapel Church. The church planned to use the truck to deliver food and clothing donations to needy families. The truck had a:

o Current adjusted basis of $20,000, and a o Fair market value of $50,000 .

• Depreciation on fixed assets, all from assets placed into service in prior years, was $120,000

• Rano owns 10% of Emerald Woods Golf Inc., a domestic corporation, which paid Rano $300,000 in dividends last year

• Rano also owns 40% of Catawba Vineyards, Inc. (I.D., 34-654321), which is a domestic U.S. (Ohio) corporation popular as a Midwest destination winery, restaurant, and resort. Catawba Vineyards is especially known for its sweet, Lake Erie Catawba wines.

o Rano received $300,000 in dividends from Catawba Vineyards last year. o Rano can answer "no" to all questions on Form 1120, Schedule K, except

question 5a.

• Rano uses the calendar year for tax filing. • It is not part of any affiliated group of companies.

III. Steps to Completion 1. Prepare last year's Form 1120 for Rano Corporation 2. On the last page, prepare the Form M-1. Note, do not prepare Form L or Form

M-2 3. Prepare all forms needed as support for Form 1120, including:

i. Form 1125-A: Cost of Goods Sold, ii. Form 1125-E: Compensation of Officers, iii. Form 4562: Depreciation and Amortization, and iv. Other forms, if needed.