State Corporation Tax Return-Spring 2017

Using certain information from FAR, Inc., and the data provided below, prepare a 2016 North Carolina Corporation Tax Return(CD-405).

ASSUMPTIONS:

FAR, Inc. is incorporated and domiciled in North Carolina and provided services (and therefore has Nexus) in South Carolina and Tennessee.

FAR, Inc. Taxable Income from Form 1120, line 28, minus line 29b=$165,000

The FAR balance sheet is as follows:

Account January 1,2016 December 31,2016

Cash $ 95,761 $ 107,863

Tax-exempt securities (at cost) 32,000 32,000

Marketable securities (at cost) 125,000 110,000

Office furniture & equipment 85,000 102,000

Accumulated depreciation (36,761) (45,763)

Total assets $ 301,000 $ 306,100

Nonrecourse equipment loan $ 35,000 $ 23,000

Common Stock $ 40,000 $ 40,000

Additional Paid-in Capital $ 160,000 $ 160,000

Retained Earnings $ 66,000 $ 83,100

Total liabilities and Capital $ 301,000 $ 306,100

ADDITIONAL INFORMATION:

Assume the computation of the Franchise Tax is based solely on the net worth as computed in Schedule C (i.e. ignore Schedules D & E).

Assume that Section 179 depreciation and MACRS is acceptable under North Carolina tax law. Therefore there are no deprecation adjustments from the federal return.

Tax exempt income totaled $1,600 which consisted of $400 from Georgia-based municipalities; and $1,200 from North Carolina-based municipalities.

Interest income totaled $2,400 as reported on the federal return which included $1,900 of interest on federal treasury bonds (U.S. obligation).

The employer ID Number is 67-1234598; the NAICS Code is 541400; and the Secretary of State is 9753642. The date of incorporation and certificate of authority to operate in NC was obtained on 1/1/2012. The company has not been audited by any taxing agency.

Any overpayment of state tax (if any) is to be refunded. Any balance due (if any) will NOT be subject to underpayment penalty or interest.

The company made timely quarterly estimated taxes to North Carolina Department of Revenue. The total tax paid for 2016 was $300 for Franchise Taxes (enter on Schedule A; Line 6); and $4,000 for North Carolina income tax (enter on Line 29b of Schedule B). Total NC tax paid was $4,300. No state income taxes were paid to Georgia or Tennessee.

There was no non-apportionable income earned by the company and no Net Economic Loss to be reported. (Therefore, ignore Schedule N).

Include the $25 Annual Report Fee on line 27 of Schedule B

Assume that the charitable contribution was made to United Way located in North Carolina and therefore is deductible for North Carolina purposes.

The sales apportionment factor for North Carolina is three times that of the payroll factor and the property and the property factor (Therefore it is a 5-factor formula)

Total net sales for the company was $818,000 allocated as follows:

North Carolina - $488,000

South Carolina - $235,000

Tennessee - $95,000

Total payroll for the company was $480,000. Of this amount, $80,000 was paid to Michael Fox (president) who resides in North Carolina and the remaining $400,000 was apportioned as follows:

North Carolina - $230,000

South Carolina - $90,000

Tennessee - $80,000

The company maintains office equipment in North Carolina, Tennesee, and South Carolina. The beginning and end of year office furniture and equipment values are as follows:

JAN.1 DEC. 31

North Carolina $50,000 $67,000

South Carolina $25,000 $25,000

Tennessee $10,000 $10,000

$85,000 $102,000

REQUIRED: 1. Prepare a Form CD-405 (pages 1-6) for the corporation for 2014 including Schedules A,B, C, F,H,L, AND O. Ignore Schedules D, E, G, I, J, M, AND N.

WEBSITE: http://www.dornc.com/downloads/cd405.pdf