Please read all instructions carefully before you get started on this assignment!

Your group Tax Advisors, LLP has been assigned the task of preparing the 2019 tax return for a new client, (KEC). KEC (Employer Identification Number 81-943208) services and repairs industrial restaurant equipment and is located at 7901 E Colonial Dr., Orlando, FL 32807. KEC has provided 2019 financial statements and supplementary schedules in an attached excel workbook. Your team was also provided the following additional information from the client:

1. 1) KEC was incorporated on January 1st, 2014 but did not begin operations until later that year after purchasing a number of key assets. KEC has always only had three shareholders: Paisley Roach, Johnathan Ignatius, and Isaac Burnett. Paisley and Johnathan each own 35% of the outstanding voting stock, and Isaac owns the remaining 30%. All three are actively involved in the operations of the business and are corporate officers.

2. 2) The officers chose to operate the company as a C corporation and to use the cash method of accounting for financial and tax reporting. KEC operates on a calendar year for both book and tax purposes. The company has been profitable since its inception. In addition, the company has a $3,000 capital loss carryforward from two years ago and a $1,000 unrecaptured Sec 1231 loss from last year.

3. 3) Paisley lives at 1017 Bluejack Oak Dr in Oviedo, FL 32765 and her social security number is 251-39-7624. Johnathan lives at 2887 Upland Ridge Ct in Chuluota, FL 32766, and his social security number is 479-63-3328. Isaac lives at 2367 Stewarts Cove in Orlando, FL 32828, and his social security number is 112-46-9989. Paisley, Johnathan, and Isaac all received $60,000 of compensation in 2019 and all three work 45-50 hours per week. None of the three are involved in any other trade or business. Paisley and Johnathan both received a dividend of $12,000 and Isaac received a dividend of $10,000.

4. 4) In 2019, the KEC made four equal federal estimated tax payments of $3,500 each on or shortly before their due dates of April 15, June 15, September 15, and December 15.

5. 5) KEC has five employees in addition to the officers. The only benefits provided to employees is contributions to a qualified pension plan (i.e., employees do not receive health or life insurance). The company is the beneficiary of the officers life insurance policy.

6. 6) A review of prior year returns reveals that KEC has never taken section 179 or bonus depreciation deductions. Upon discussing the matter with Paisley, you find out she was never made aware of these deductions by her previous tax return preparer but would like to start taking section 179 deductions going forward. Assume none of the property placed into service this year qualifies for bonus depreciation.

7. 7) All of the vehicles used in the business are heavy-duty vehicles that are used only by employees on company business. The recovery period for each asset is already listed in the tax depreciation worksheet template provided to you.

8. 8) On February 1, 2019, KEC sold a piece of land for $50,000 to a developer who built a Taco Bell. The land was a lot adjacent to KECs depo and was originally purchased for $45,000 in 2014. The land had been used as an unpaved parking lot for the companys vehicles and some storage. However, Paisley realized the land was not needed after the depo was cleaned and reorganized late in 2018.

9. 9) In 2019, KEC sold some assets and placed three new assets into service. First, on March 3, all of the old computer equipment in the office was sold for $1,500 and replaced with new computer equipment costing $20,000. Second, on July 17, KEC purchased a new piece of service equipment for $45,000 but decided to keep the old equipment as it was still in good working shape. Third, on October 9, Van 1 and Van 2 were sold for $4,000 each and replaced by a new heavy-duty truck costing $60,000.

10. 10) On December 28, 2019 Paisley received an email from FedEx that a certified letter had been delivered to the depo. On January 3, 2020 when Paisley returned to the depo after the holidays, she found the letter contained a check for $23,000 from a customer for services provided and billed in 2019. The check was not deposited until January 4th, so Paisley did not include it when computing gross receipts on the 2019 income statement.

11. 11) All dividends received by KEC were from domestic corporations in which KEC owned less than a 1% interest. Also, all charitable contributions were made to qualified charities.

Required:

1. 1) Prior to entering the information on the tax return forms:

   1. a) Prepare a tax depreciation schedule using the template provided.

   2. b) Prepare a tax gain/loss schedule using the template provided.

   3. c) Calculate taxable income using the taxable income worksheet template provided.

2. 2) Prepare Kitchen Equipment Corporations 2019 corporate income tax return and any required forms/schedules and supplemental schedules. The forms available on irs.gov. Round all computations to the nearest dollar. You may not use tax preparation software. The required IRS forms and schedules are Forms 1120 (along with all included schedules), Schedule D (Form 1120), Schedule G (Form 1120), 4562, 4797, (other tax forms if needed). You can download the forms & instructions from the IRS website at www.irs.gov. These are pdf fill-in forms, so you should fill them in and submit them electronically.

3. 3) Prepare a cover letter in good business form. The letter should provide the officers with filing instructions such as due date, and where to mail the return as well as any other relevant information (give this some thought!). Include a paragraph thanking them for allowing you to prepare the return. This will be the last primary correspondence until you begin tax planning for next year.

4. 4) Provide supplemental statements (either in excel or a word document file) where required or when more than one income or expense item is aggregated with others on one line of the return. Number and title each statement, and include a reference for the form and line number to which the supplemental statement corresponds. Also reference the supplemental statement in the return by number. For example, line 17 on form 1120 includes multiple line items. A supplemental schedule for this line may appear as follows:

Statement 1 - Taxes and Licenses (Form 1120, line 17)

Taxes-Payroll/Unemployment Taxes-Property

Total

$ xx,xxx $ x,xxx $ xx,xxx

This schedule should be included with other schedules in a document attached in the order indicated in number 6 below. In addition, form 1120 should include something to the effect of see statement #1 next to the number reported on line 17 (usually to the left).

5. 5) Answer all required questions and do not leave any required information blank. For example, you should make up an address and ID number for your accounting firm as the return preparer. If any reasonable assumptions are made in preparing the return, provide them as a supplemental schedule at the end of the return.

6. 6) When assembling the return, place the IRS forms and schedules in the following order: Cover Letter (include all relevant correspondence), Forms 1120, Schedules D and G, 4562, 4797, (other tax forms if needed), supplemental statements, taxable income template, tax depreciation worksheet and tax gain/loss worksheet.