Business, 06.05.2020 18:10, miner12924owhu4d
Tammy Adams and Fernando Hernandez each own 50% of Custom Designs, Inc. (CDI). On May 6, 2003, they formed CDI to provide architectural services. CDI’s information is summarized as follows:
CDI’ s business address is 2120 Adobe Drive, Las Cruces, NM 88011; its employer identification number is 11-1111111, and the principal business activity code is 541310.
CDI is a cash method, calendar year taxpayer.
CDI’s financial statement for 2016 is show below:
Income Statement
Income
Professional fees
739,000
Long-term capital gain
5,000
Short-term capital gain
8,000
Long-term capital loss
6,000
Dividends distributed from Gary Inc. (CDI ownership in Gary is 17%)
20,000
Interest income
State bonds $18,000
Corporate bonds 24,000
42,000
Life insurance proceeds on the death of a key employee
500,000
Total income
1,308,000
Expenses
Salaries-officers
Tammy Adams: 190,000
Fernando Hernandez: 190,000
380,000
Salaries -clerical
61,000
Taxes (state, local , and payroll)
55,620
Advertising
17,650
Rental expenses
9,270
Repairs and maintenance
16,340
Interest expenses:
On loan to purchase state bonds
10,500
Depreciation* (depreciation for tax purpose is $42,000)
35,000
Premiums on life insurance for key employees
25,000
Meals and entertainment
9,800
Total expenses
620,180
Net income before taxes
687,820
Tax
233,858
Income after tax
453,962
During 2016, CDI made estimated tax payment of $60,000 each quarter to the IRS. Prepare a Form 1120 page 1 and schedule M-1 on page 5 for CDI for tax year 2016
Answers: 2
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Tammy Adams and Fernando Hernandez each own 50% of Custom Designs, Inc. (CDI). On May 6, 2003, they...
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