Response to the following problem:
Your client, a sports equipment and apparel retail chain, wishes to incorporate under the name JKEB Enterprises, Inc. The company is located within the state of Florida.
Focus on preparing the following portions of the paper. This portion should explain the following in 3 to 4 pages:
How to incorporate
Identify areas of the articles of incorporation to provide the client with guidance on, also provide the steps for your client to incorporate.
Obtain a taxpayer identification number
Provide the steps and websites the clients will need to use.
Method of accounting for tax records
Educate the client on cash versus accrual accounting from a tax basis. Highlight the differences for them and provide a recommendation.
2012 Corporate Tax Rate Schedule (partial)
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Taxable Income Greater Than
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But Less Than Or Equal To
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Tax Is
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Of the amount exceeding
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$0
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$50,000
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15%
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$0
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$50,000
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$75,000
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$7,500 + 25%
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$50,000
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$75,000
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$100,000
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$13,750 + 34%
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$75,000
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$100,000
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$335,000
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$22,250 + 39%
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$100,000
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JKEB Corporation has the following revenues and expenses for the current tax year:
Sales revenue, net of returns . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
Dividend Income (less than 20% owned investees) . . . . . . . . . . 25,000
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Normal business expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
What is JKEB Corporation's dividends-received deduction for the current tax year?
Assuming that JKEB Corporation's normal business expenses were $82,000 instead of $40,000, compute its dividends-received deduction for the current tax year.
JKEB Corporation incurred the following capital gains and losses in tax year 2012:
Short Term Capital Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,000
Short Term Capital Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,000)
Long Term Capital Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Long Term Capital Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,000)
JKEB's prior corporate tax returns reflect the following net capital gain/ (loss):
2008 - $6,000 gain
2009-$8,000 gain
2010-($3,000) loss
2011-$1,000 gain
Calculate the net capital gain (loss) for 2012. How is this reported on the 2012 Form 1120?
Calculate the amount of capital loss carryback (if any) to tax years 2008 through 2011 inclusive.
Calculate the amount of capital loss carryforward (if any) to 2013. How will this loss be treated in 2013 (i.e., as a short-term or long-term capital loss)?
JKEB Corporation had the following items during its 2012 tax year:
Net income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000
Dividends received (from less than 20% owned investees). . . . . . . . . . . 10,000
Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Net operating loss carryover from 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Long-term capital gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Long-term capital losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Short-term capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Capital loss carryover from 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
Tax Credit........................................................................... 4,500
Compute JKEB Corporation's 2012 taxable income and income tax liability before tax credits.
What are the nature and amount of any carryovers to 2013?
What is the taxable amount due after using the tax credit?
Use the following information for JKEB Corporation to complete pages 1 through 3 of the 2011 Form 1120. The final return is due in week five.
Address: 1994 Lincoln St, Township, FL 34691
Employer Identification Number: 98- 325465
Date Incorporated: 01-01-11
Accounting Method: Accrual
Use the following link to determine the principal business activity code:
IRS Form 1120
JKEB Corporation's activities are focused more on sporting goods than apparel. They are not a subsidiary of another corporation and no entity owns more than 20% of JKEB Inc.
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Total Assets
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$2,250,000
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Total Receipts/Sales
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$3,750,000
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Returns and Allowances
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$187,500
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Cost of Goods Sold
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$950,000
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Dividends from less than 20% owned investees
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$300,000
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Dividends from 20% or more owned investees
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$15,000
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Interest
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$5,000
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Income from store vending machines
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$1,500
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Salaries and Wages
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$150,000
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Bad Debts
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$12,500
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Rent
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$40,000
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Charitable contributions during 2011
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$2,000
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Advertising
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$5,000
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Repairs
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$2,750
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Tax Deposits during 2011
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$10,000
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