Income Tax Return Project
Instructions:
Please complete the required federal corporation income tax return forms manually (no tax software) for Ventura Fairs, Inc. for the 2016 tax year, unless instructed otherwise, based upon the facts presented below. Also, if required information is missing, use reasonable assumptions to fill in the gaps.
Ventura Fairs, Inc. (VFis organized as a corporation and is taxed as a "C" corporation with a calendar year-end. VF owns and operates an amusement park in Oxnard, California. Oxnard's weather allows VF to operate year-round. VF's address, employer identification number (EIN), and date of incorporation are as follows:
Ventura Fairs, Inc.
50 Boardwalk
Oxnard, California 93030
EIN- 36-4385943
Date Incorporated- July 23, 1997
VF has been at the same address and has not changed its same since inception.
VF has only common shares issued (no preferred stock).
VF is owned by 86 shareholders. The majority owner of VF is large private equity firm based in San Jose, California called Amusement Ventures, LLC (AV). AV's address, employer identification, and other information area's follows:
Amusement Ventures, LLC
675 Shady Wood Boulevard
San Jose, California 95101
EIN- 54-8293213
AV is taxed as a partnership for federal tax purposes. AV is organized in California. It owns 30% of the voting stock of VF directly. No other person or entity owns directly or indirectly owns more than 5% of the voting stock of VF.
VF uses the accrual method of accounting. VF is not a subsidiary nor is it in an aVFiliated group with any other entity. VF is not audited by a CPA firm. It does, however, use GAAP-based financial statements. VF has never had a restatement of its income statement.
In addition, VF reported the following information for the current year:
- VF did not pay dividends in excess of its current and accumulated earnings and profits.
- None of the stock of VF is owned by non U.S. persons
- VF has never issued publicly offered debt instruments.
- VF is not required to file a Form UTP
- VF made payments that required it to file federal Form(s) 1099. These Forms 1099 were filed timely by VF.
- During the year, none of the shareholders of VF changed.
- VF has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or tax deferred transaction.
- VF did not receive any assets in a Section 351 transfer during the year.
- All of the questions on Schedule B, Form 1120 should be answered with "no" for the year.
Additional information:
On August 1, VF was notified by its legal counsel that VF was being sued by a former employee regarding her termination of employment from VF. As of December 31, CY (current year), no legal settlement had been reached. However, legal counsel has advised VF that the settlement amount of $190,000 is probable (although the number could be slightly more or less) and the law firm believes a confidential settlement will be executed by both parties sometime in February of next year. VF accrued this expense on its financial statements.
VF maintains a portfolio of tax-exempt securities (none of which are private activity bonds) and publicly-traded stocks as a measure to provide immediate liquidity if needed (none of these investments is debt financed). All of these securities originate from less than 20% owned domestic corporations.
During the year, VF upgraded its main attraction. From inception until this year the Rapid Coaster had been the main attraction. However due to safety, crowd appeal, and other factors, VF disposed of the Rapid Coaster on March 1 and purchased a new attraction known as the Vomitnator. The Rapid Coaster cost $2,000,000 and was put in service on September 1, 2001. The Rapid Coaster was fully depreciated for book, regular tax, and AMT tax depreciation purposes.
The Vomitnator was installed and rendered operational on March 1. The Vomitnator cost $6,000,000.
VF's regular tax depreciation for the year is correctly calculated as $1,112,499before considering the 2016 addition of the Vomitnator. VF's AMT depreciation for the year is correctly calculated as $744,977 before considering the 2016 addition of the Vomitnator. VF does not want to claim any current year bonus depreciation. Further, VF wants to depreciate the Vomitnator using the general depreciation method system "GDS" for regular tax purposes.
VF officer information for the year is as follows (compensation amounts included in total wages on the income statement for all employees):
|
Name
|
Social security number
|
Percent of time devoted to business
|
Percent of stock owned
|
Amount of compensation
|
|
Marissa Hunt
|
435-54-2342
|
100%
|
.05%
|
$235,000
|
|
Dakon Williams
|
243-98-3242
|
100%
|
.03%
|
$195,000
|
|
Deon Johnson
|
194-23-7435
|
100%
|
0%
|
$165,000
|
|
Jennifer Conley
|
623-53-3920
|
100%
|
0%
|
$150,000
|
Near the end of the year, VF switch edits property and casualty insurance company. As a result, the plan year for its insurance contract was altered. On December 31, 2016VF prepaid insurance premiums of $25,000 representing coverage through February 15 of 2017as a condition of being accepted by the new company. VF did not expense any of the prepayment for financial accounting purposes
VF rents from vendors several pieces of equipment to use in its business. As of December 31, 2015 and December 31, 2016, respectively, VF had prepaid vendors for equipment rental of $30,000 for January of the current year and $35,000 for January of next year, respectively.
On December 26, 2015VFprepaid a contractor $17,500 to repair several pieces of maintenance shop equipment in January of 2017.VF fully expects that the contractor will have completed the project by January 31 of next year.
All of the accrued wages and bonus amounts on the financial statements as of December 31, 2016 were paid on February 28, 2017.
As of December 31, 2015 and 2016, respectively, VF had vacation accruals on its books of $29,000 and $35,000. As of March 15, 2016and 2017, respectively, VF had paid $5,000 and $8,000 of those accrued amounts.
On December 2, 2016, the millionth customer entered the park. To recognize the accomplishment and to promote the amusement park through print and radio media advertisements, VF held a give-away contest wherein the lucky customer deemed to be the millionth customer would be given $100,000. The check was presented to the lucky winner on January 15, 2017.
The land on which VF resides is owned by the county. VF has a very favorable lease with the county that allows VF the ability to sublease any portion of the ground to another tenant. The board of directors of VF made the decision in the fall of the 2016to seek out a tenant for unimproved land that would not be utilized in any potential expansion plans. VF identified the potential renter and entered into a contract with the renter on December 1, 2016. The rent period is to begin on January 1, 2017; however, as part of the contract, the renter was required to pay a full six-month rental amount ($50,000) to VF by December 31, 2016. VF received a check of $50,000 on December 27, 2016 from the renter. This rental payment is not refundable to the renter under any circumstances.
VF maintains an inventory of several items that it uses in its amusement park. Inventory is valued at cost. VF has never has never changed it inventory method. VF uses specific identification for its inventory. VF has never written down any subnormal goods. The rules of Section 263A (Unicap) do not apply to VF.
On December 1, 2016, VF paid a dividend to all common stockholders of $400,000.
During the current year, VF made federal estimated income tax payments of $72,500each on April 15, June 15, September 15 and December 15 of the current year ($290,000 in total). If VF has overpaid its current year estimated taxes, VF would like to apply the excess to its estimated tax payments for next year. VF is NOT a "large corporation." VF's 2015 tax liability was $200,000.
VF made California state estimated income tax payments of $15,000 each on April 15, June 15, September 15 and December 15 of 2016 ($60,000 in total).
VF does not have a minimum tax credit carry forward from 2015.
Attachment:- Assignment File.rar