Viola Holloway and Renee Forrow are the sole equal shareholders in the corporation of Holloway And Forrow Enterprises, Inc. The corporation, which is a retail office supplies and stationery store, began its operations on January 2, 1985 (also date of incorporation). For Federal Income Tax purposes, the corporation is a calendar year taxpayer and uses the Accrual Method Of Accounting. Its Employer Identification Number is 76-1234567, address is 17302 East Meadow Bird Circle Houston, Texas 77086-1747, telephone number is (281) 437-6211, fax number is (281) 734-2116 and E-Mail address is "hollowayandforrowenterprises.com". The business activity code for the corporation is 451140. Viola Holloway is the president of the corporation and its contact person for Federal Income Tax purposes and Renee Forrow is the secretary and treasurer of the corporation. Both are full-time employees of the corporation devoting one hundred percent (100%) of their time to the business and each has an annual salary of $75,000. Viola Holloway's social security number is 678-90-1234 and her address is 1953 Beverly Lane Houston, Texas 77064-3218. Renee Forrow has social security number of 789-01-2345 and her address is 1606 Natalie Court Houston, Texas 77089-4637.
FINANCIAL INFORMATION
During the year of 2017, Holloway And Forrow Enterprises, Inc. reported the following Income and Expenses (including necessary accruals) for Financial Accounting purposes:
Gross Receipts $1,482,000
Sales Returns And Allowances 109,000
Purchases 510,000
Dividends Received From Stock (Not Qualified Dividends)
Investments In Less Than twenty percent (20%)
Owned United States (U. S.) Corporation 80,000
Interest Income:
Taxable Interest 18,000
Tax-Exempt Interest 7,200
Salaries: Officers 150,000
Other Employees 108,000
Repairs And Maintenance 19,300
Rent Expense - Office 84,000
Rent Expense - Equipment 15,500
Payroll Taxes (Federal And State) 19,600
Interest Expense 25,200
Advertising Expense 44,500
Charitable Contributions 48,000
Legal And Professional Fees 28,800
Depreciation Expense 50,000 *
Utilities Expense 27,300
Employee's Health Insurance Premiums 14,200
Entertainment Of Clients 5,000
Officers' Life Insurance Premiums 14,400 **
-1-
* - Based upon Straight-Line Depreciation, a useful life of five (5) years and no salvage value for all assets (see specific assets below).
** - Holloway And Forrow Enterprises, Inc. Is The Designated Beneficiary.
The Holloway And Forrow Enterprises, Inc. owns the following depreciable assets:
ASSET DESCRIPTION DATE ACQUIRED ORIGINAL COST
Automobile – 2016 Lexus 460 April 1, 2016, $ 50,000
(Five-year Property)
Automobile – 2016 Cadillac Seville April 1, 2016, 50,000
(Five-year Property)
Furniture And Fixtures May 1, 2015, 150,000
(Seven-year Property)
Each automobile has used a total of 18,000 miles during the year of 2017 all of which were business miles. The automobiles were not available for personal use during off-duty hours and were used solely by Viola Holloway and Renee Forrow, who both have another vehicle available for personal use. For Federal Income Tax purposes, all of these assets are depreciated using the Modified Accelerated Cost Recovery System (MACRS). Section 179 Deduction was not elected in regards to any of these assets nor was Straight-Line Depreciation used.
BALANCE SHEETS
The Balance Sheets (Financial Accounting) for the Holloway And Forrow Enterprises, Inc. at the beginning and ending of the year of 2017 are as follows:
ASSETS January 1 December 31
Cash $ 36,000 $ 84,000
Trade Notes And Accounts Receivable 96,000 90,000
Inventory (Valued At Cost) * 120,000 100,000
Marketable Securities - Long Term 140,000 170,000
Depreciable Assets (And Land) 260,000 ** 260,000 **
Less: Accumulated Depreciation (65,000) (115,000)
Other Assets (Deposits) 12,000 12,000
------------ -------------
TOTAL ASSETS $ 599,000 $ 601,000
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable (Non Recourse) $ 96,000 $ 116,200
Federal Income Taxes Payable 8,600 ?
Notes Payable - Short Term (Recourse) 16,000 24,000
Notes Payable - Long Term (Recourse) 164,000 212,000
Common Stock 10,000 10,000
Retained Earnings (Unappropriated) 304,400 229,042
TOTAL LIABILITIES AND ------------ ------------
STOCKHOLDERS' EQUITY $ 599,000 $ 601,000
======= =======
* - The rules of Section 263A of the Internal Revenue Code do not apply to the corporation.
** - Includes $10,000 allocated to Land.
-2-
ESTIMATED TAX PAYMENTS
During 2017, Holloway And Forrow Enterprises, Inc. made the following estimated tax payments:
April 17, 2017 $30,000
June 15, 2017 $20,000
September 15, 2017 $20,000
December 15, 2017 $10,000
The 2016 Federal Income Tax liability for Holloway And Forrow Enterprises, Inc. was $76,800 and no overpayment of 2016 Federal Income Tax is being applied to the 2017 Federal Income Tax liability of Holloway And Forrow Enterprises, Inc.
OTHER INFORMATION
Both shareholders of Holloway And Forrow Enterprises, Inc. are United States Citizens. Holloway And Forrow Enterprises, Inc. does not own directly or indirectly fifty percent (50%) or more of the voting stock in any other domestic corporation and the corporation is not a subsidiary in an affiliated group or a parent-subsidiary controlled group. During the year of 2017, Holloway And Forrow Enterprises, Inc. paid cash dividends of $280,000 ($140,000 to each shareholder) and the corporation did not pay dividends in excess of the corporation's Current Earnings And Profits and Accumulated Earnings And Profits. In addition, Holloway And Forrow Enterprises, Inc. is not a shareholder in any foreign corporation nor has any interest in or a signature or other authority over any financial account in a foreign country. Furthermore, during the year of 2017, the corporation did not receive a distribution from nor was a grantor of, or transferor to, a foreign trust. Moreover, Holloway And Forrow Enterprises, Inc. did not issue publicly offered debt instruments with original issue discount. Finally, the corporation had no Net Operating Losses (NOL's) carryover from prior tax years.
REQUIRED
Prepare the C (Regular) Corporation Tax Return for the Holloway And Forrow Enterprises, Inc. for the tax year of 2017. The following forms are needed to complete the Tax Return:
Form 1120
Form 1125-A
Form 1125-E
Schedule G (Form 1120)
Form 4562
Form 4626
USA 
India