2020 Federal Income Tax Return for Fun Fair of Ventura, Inc.

Organizational Information

Instructions:

Please complete the 2020 Federal income tax return for Fun Fair of Ventura, Inc. based upon the facts presented below.  If required information is missing, use reasonable assumptions to fill in the gaps.  

Fun Fair of Ventura, Inc. (FF) is organized as a corporation and is taxed as a “C” corporation with a calendar year-end.  FF owns and operates an amusement park in Oxnard, California.  Oxnard’s weather allows FF to operate year-round.  FF’s address, employer identification number (EIN), and date of incorporation are as follows:

Fun Fair of Ventura, Inc.

50 Boardwalk

Oxnard, California 93030

EIN: 36-4385943

Date Incorporated: July 23, 2003

FF has been at the same address since inception.

FF has only common shares issued (no preferred stock).

FF is owned by 86 shareholders.  The majority owner of FF is a large private equity firm based in San Jose, California called Amusement Ventures, LLC (AV).  AV’s address, employer identification, and other information are as follows:

Amusement Ventures, LLC

675 Shady Wood Boulevard

San Jose, California 95101

EIN: 54-8293213

AV is taxed as a partnership for federal tax purposes.  AV is organized in California.  It owns 30% of the voting stock of FF directly.  No other person or entity owns directly 20% or more, or owns, directly or indirectly, more than 50% of the voting stock of FF.

FF uses the accrual method of accounting.  FF is not a subsidiary nor is it in an affiliated group with any other entity.  FF is not audited by a CPA firm.  It does, however, use GAAP-based financial statements.  FF has never had a restatement of its income statement.

FF reported the following information for 2020:

• FF did not pay dividends in excess of its current and accumulated earnings and profits.
• None of the stock of FF is owned by non-U.S. persons
• FF has never issued publicly offered debt instruments.
• FF is not required to file a Schedule UTP, Uncertain Tax Position Statement.
• FF made payments that required it to file federal Form(s) 1099.  These Forms 1099 were filed timely by FF.
• FF’s average annual gross receipts for the prior three years are under $26,000,000.
• None of the shareholders of FF changed during the year.
• FF has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or tax deferred transaction.
• FF did not receive any assets in a Section 351 transfer during the year.
• FF elects to file a complete Schedule M-3 even if only M-1, or a partial M-3, is required.

On August 1, 2020 FF was notified by its legal counsel that FF was being sued by a former employee regarding her termination of employment from FF.  On December 21, 2020, a legal settlement was reached with this terminated employee.  As part of the settlement, FF agreed to pay the employee a settlement amount of $190,000 on January 10, 2021.  FF accrued this expense on its 2020 financial statements.

FF maintains a portfolio of tax-exempt securities (none of which is a private activity bond) and publicly traded stocks as a measure to provide immediate liquidity if needed (none of these investments is debt financed).  All of these securities originate from less than 20% owned domestic corporations.

FF owns 12% of Fun Fair of Russia (FFR), a Russian corporation operating a theme park on the outskirts of Moscow.  FFR remitted dividends to FF of $14,000. FF also received $300 in dividends from holding marketable securities on occasion (all less than 20% owned by FF).

Ownership Information

From inception until this year the Rapid Coaster had been FF’s main attraction, but as it aged it has lost some appeal. To attract new customers, FF purchased a new attraction known as the Vomitnator. The Vomitnator was installed and rendered operational on March 1, 2020 at a cost of $6,000,000 to acquire, install, and make ready for service.

FF’s regular tax depreciation for the year is correctly calculated as $1,112,499 before considering the 2020 addition of the Vomitnator.  FF wants to claim the maximum allowable deduction for the Vominator in 2020.  Because of the Vominator’s modular design, it is considered personal (as opposed to real) property.

FF officer information for the year is as follows (compensation amounts included in total wages on the income statement for all employees):

Near the end of the year, FF switched its property and casualty insurance company.  As a result, the plan year for its insurance contract was altered.  On December 31, 2020 FF prepaid insurance premiums of $25,000 representing coverage through February 15, 2021 as a condition of being accepted by the new company.  FF did not expense any of the prepayment for financial accounting purposes.

FF rents from vendors several pieces of equipment to use in its business.  As of December 31, 2019 and December 31, 2020, respectively, FF had prepaid vendors for equipment rental of $30,000 for January 2020 and $35,000 for January 2021.

On December 26, 2020 FF prepaid a contractor $17,500 to repair several pieces of maintenance shop equipment in January of 2021.  FF fully expects that the contractor will have completed the project by January 31, 2020.

All the accrued wages and bonus amounts on the financial statements as of December 31, 2019 were paid on February 28, 2020.

As of December 31, 2019 and 2020, respectively, FF had vacation accruals on its books of $29,000 and $35,000.  As of March 15, 2020 and 2021, respectively, FF had paid $5,000 and $8,000 of those accrued amounts.

On December 2, 2020, the millionth customer entered the park.  To recognize the accomplishment and to promote the amusement park through print and radio media advertisements, FF held a give-away contest wherein the lucky customer deemed to be the millionth customer would be given $100,000.  The check was presented to the lucky winner on January 15, 2021.  

The land on which FF resides is owned by the county.  FF has a very favorable lease with the county that allows FF the ability to sublease any portion of the ground to another tenant.  The board of directors of FF made the decision in the fall of 2020 to seek out a tenant for unimproved land that would not be utilized in any potential expansion plans.  FF identified the potential renter and entered into a contract with the renter on December 1, 2020.  The rent period is to begin on January 1, 2021; however, as part of the contract, the renter was required to pay a full six-month rental amount ($50,000) to FF by December 31, 2020.  FF received a check of $50,000 on December 27, 2020 from the renter.  This rental payment is not refundable to the renter under any circumstances.

FF maintains an inventory of several items that it uses in its amusement park.  Inventory is valued at cost.  FF has never has never changed it inventory method.  FF uses specific identification for its inventory.  FF has never written down any subnormal goods.  The rules of Section 263A (Unicap) apply to FF.  The Unicap calculated costs related to ending inventory at December 31, 2019 and 2020, respectively, were $15,000 and $19,000. Total current year 263A costs were $22,610, with $18,610 included in COGS during 2020. FF does not include any of its salary and wage expenses as labor costs for COGS.

On December 1, 2020, FF paid a $400,000 (total) dividend to all common stockholders.

During the year, FF made Federal estimated income tax payments of $72,500 each on April 15, June 15, September 15 and December 15 of 2020 ($290,000 in total).  If FF has overpaid its current year estimated taxes, it would like to apply the excess to its estimated tax payments for next year.  FF is NOT a “large corporation.”  FF’s 2019 tax liability was $200,000.

FF made California state estimated income tax payments of $15,000 each on April 15, June 15, September 15 and December 15 of 2020 ($60,000 in total).