Instructions:'s 2018 tax return based upon the information provided below.
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Instructions:

Please help me with Express Catering, Inc.'s 2018 tax return based upon the information

provided below.  If required information is missing, help use reasonable assumptions to fill in the gaps. Ignore any Alternative Minimum Tax (AMT) calculations and PLEASE DO NOT INCLUDE AMT related forms.


Express Catering, Inc. (EC) is organized in the state of New York as a corporation and is taxed as a "C" corporation with a calendar year-end. EC operates a delicatessen/bakery in New York City, NY that specializes in mobile food catering for events and gatherings within the tri-state area. EC's address, employer identification number (EIN), and date of incorporation are as follows:


Express Catering, Inc.

257 West 55th Avenue

New York City, NY 10027

EIN- 13-9823459


Date Incorporated: March 17, 2011


EC's address has not changed since its inception.


EC has only common shares issued (no preferred stock). There are currently 10,000 shares of EC common stock issued and outstanding.


EC is owned by four shareholders from the same family: Raphael Giordano (father) and his three children Silvia, Andrea, and Marco. Their personal information is provided below:

               Raphael Giordano

               160 West 57th Avenue

               New York City, NY 10027

               SSN: 356-87-4322

               Shares owned 5,500


               Silvia Giordano Costa

               250 South Main

               Hoboken, New Jersey 07030

               SSN: 284-58-4583

               Shares owned 1,500


               Andrea Giordano

               65 East 55th Avenue

               New York City, NY 10027

               SSN: 423-84-2343

               Shares owned 1,500


               Marco Giordano

               160 West 57th Avenue

               New York City, NY 10027

               SSN-487-27-4797

               Shares owned 1,500


EC uses the accrual method of accounting and follows GAAP. EC is not a subsidiary nor is it in an affiliated group with any other entity. EC is not audited by a CPA firm and has never had a restatement of its income statement.


 EC reported the following information for the year:


·        EC did not pay dividends in excess of its current and accumulated earnings and profits.

·        None of the stock of EC is owned by non-U.S. persons.

·        EC has never issued publicly offered debt instruments.

·        EC is not required to file a Form UTP.

·        EC made several payments in the current year that required the filing of federal Forms 1099. These Forms 1099 were filed timely by EC.

·        During the year, none of the shareholders of EC changed.

·        EC has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or tax-deferred transaction.

·        EC did not receive any assets in Section 351 transfers during the year.

·        All of the questions on Schedule B, Form 1120 should be checked "no" for the year.


Additional information:


EC has been rapidly expanding its catering business. This expansion has required a significant amount of new equipment purchases. EC sold some of its liquid investments in order to avoid having to take on debt to fund these purchases. Further, EC invested heavily in its catering business by significantly increasing its advertising budget. EC and its officers expect that revenue increases from these expenditures will begin next year.

Despite being profitable the past few years, EC does not want to carryback net operating loss (if any) generated in the current year. EC believes the next few years will be far more profitable and the losses will be of a greater tax benefit in the future.

The dividends received by EC during the year were paid by Apple, Inc.

EC had its sole municipal bond (New York City) redeemed (bought back) in the current year. EC originally purchased the New York City bonds on February 1, 2014 for $100,000 (no premium or discount paid). The bond was redeemed by New York City on February 1, 2018 for $100,000.  Both tax basis and proceeds received on this transaction were reported to EC on a form 1099-B.

EC purchased 200 shares of Apple, Inc. on October 10, 2014 for $100,000 (including commission). On July 10, of the current year, EC sold the 200 shares of Apple, Inc. for $350 a share (including commission). Both tax basis and proceeds received on this transaction were reported to EC on a form 1099-B.

During the year, EC contributed $8,000 to the American Lung Association.

On December 10, EC paid Madison Advertising $27,500 to design a new catering advertisement campaign for next year. This money represented half of the total $55,000 contract price. EC expects that the services will be provided and delivered to EC on about June 30, 2019.

EC prepaid an insurance premium of $21,000 in September. The new policy is effective October 1, 2018 through September 30, 2019.

EC's regular tax depreciation for the year is correctly calculated as $350,000 before considering the current year fixed asset additions of $840,000 (see table below). EC wants to claim the fastest recovery method(s) possible on these asset additions without electing any §179 expensing.

Total current year asset additions are as follows (all the equipment purchased was new):

Description

Date Purchased

Amount

5-year MACRS Property

October 2, 2018

$480,000

7-year MACRS Property

September 10, 2018

$320,000

Delivery Truck (over 6,000 lbs): 5-year MACRS Property

October 12, 2018

$40,000

                              

EC 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

Raphael Giordano

356-87-4322

100%

55%

150,000

Silvia Costa

284-58-4583

100%

15%

130,000

Andrea Giordano

423-84-2343

100%

15%

130,000

Marco Giordano

487-27-4797

100%

15%

120,000

As reported on the balance sheet (see below), on December 31, 2017 the accrued wages were $44,500 and the accrued bonuses were $45,000. The wages and bonuses were payable to Raphael, Silvia, Andrea, and Marco. These accrued wages and bonuses were paid on January 20, of 2018. Also, as reported on the balance sheet, on December 31, 2018, the accrued wages were $51,500. The wages were owed to Raphael, Silvia, Andrea, and Marco. The accrued wages were paid on January 22, 2019.

All the other employees' wages and bonuses were paid on December 31, 2018.

As of December 31, 2017 and December 31, 2018, respectively, EC had accrued vacation payable on its books of $62,500 and $73,000. All the 2017 vacation accrual was paid during the period from April 1 through November 30, 2018. As of March 15, 2019 EC had paid none of its 2018 accrual. All of the vacation accrual amounts for both years were owed to employees other than Raphael, Silvia, Andrea, and Marco. None of the officers had accrued vacation at December 31, 2017 or 2018.

On November 1, a large insurance company paid EC a $100,000 deposit to reserve catering event services on March 18, 2019 at the insurance company's annual meeting in New York City. The money is fully refundable until January 15, 2019. Thereafter, half of the deposit becomes non-refundable.

EC maintains an inventory of several items. Inventory is valued at cost. EC has never changed its inventory method. EC uses specific identification for its inventory. EC has never written down any subnormal goods. The rules of Section 263A (UNICAP) do not apply to EC. 

EC did not pay a dividend in the current year.

EC made no estimated tax payments during the current year.

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