Description For this assignment you will be required to complete Form 1120, U.S. Corporate Income Tax Return, which includes the Schedule M-1, reconciling book/tax income. File 1: Company information provided for formFile 2: Last year example with solution 2 attachmentsSlide 1 of 2attachment_1attachment_1attachment_2attachment_2.slider-slide > img { width: 100%; display: block; } .slider-slide > img:focus { margin: auto; } Unformatted Attachment Preview Instructions For this assignment you will be required to complete Form 1120, U.S. Corporate Income Tax Return, which includes the Schedule M-1, reconciling book/tax income. 1) The 2019 tax forms are available at IRS.gov. Regardless of whether you use software or complete the return with *.pdfs, 2) Your completed project should be uploaded as a *.pdf. 3) RUBRIC—you should complete all required forms for the return. Twenty-five (25) percent of your grade is for the M-1 reconciliation and the other seventy-five (75) percent is for the remainder of the return. A total of 100 points applies to the return. Tax Return Problem: Soft Software Soft Software is a company that develops and markets legal software. In addition, the company advises law firms on software and hardware purchases, and develops custom software for law firms. It is owned by Bart G. Rugby (SSN 526-27-0829) and Delores Oldham (SSN 527-035478). Each of the owners works in the business full-time. Delores is the president and owns 75% of the company, while Bart is the vice-president and owns 25% of the company. During, 20XX (where “XX” is the current tax year), Delores received a salary of $115,000. Bart received $88,000 in salary. 1. Soft software has a calendar year end. Its employer ID number is 37-1407873. Soft began operations on February 1, last year after acquiring an existing business (see #9 re: goodwill). The company’s address is 6825 Doodle Ct., Ogden, Utah 84201. Determine Soft’s business activity code (use “other computer related services”). 2. Soft uses the hybrid method of accounting, and values inventory at cost. Beginning inventory for 20XX (books sold to customers) was $3,250. Soft purchased $5,500 of inventory during 20XX and ending inventory was $1,356. Soft’s inventory is not subject to the Uniform Capitalization (i.e., Unicap) rules under Section 263A. 3. Soft received dividends from corporations (in which it owned less than a 20% interest) of $4,300. 4. Soft sold two stocks during 20XX. The first, Primerica Industries, was purchased on March 13, 1996 at a price of $8,273. Primerica was sold November 15, 20XX for $10,000. The second stock, Ukulele, Inc., was purchased on July 5, 1999, for $20,002. Ukulele was sold on February 26, 20XX, for $8,320. 5. Soft paid estimated tax payments of $18,000 each in April, June, September, and December. Last year’s total federal income tax was $70,000. 6. The following additional income and deductions were incurred during 20XX. NOTE: Do not try to resolve that these income items, less deductions, do not equal the taxable income amount on your F1120. Remember some income and deductions are listed separately in this scenario. Similarly, do not try to reconcile the below with the ‘book’ net income that is given. Classified: General Business INCOME Sales Interest Income from Savings Accounts Interest Income from municipal bonds $889,072 18,030 11,207 DEDUCTIONS Salaries (does not include Delores and Bart)$225,000 Repairs 18,877 Rent 24,000 Taxes (other than federal income tax) 33,666 Interest 28,765 Charitable Contributions 87,000 Advertising 38,500 Business Meals 3,000 Business Entertainment 4,550 Utilities 8,400 Auto Expenses 2,540 NOTE: You should assume all ‘auto limitations’ have already been applied. Miscellaneous Expenses 36,000 NOTE: Amortization has been intentionally excluded from the list of deductions. I want you to figure it. The following additional information is relevant to 20XX: 7. Soft uses straight-line depreciation for book and MACRS for tax. During the year there were no purchases, dispositions, or changes in estimates for depreciable assets. The MACRS depreciation for 20XX is $75,200. 8. An analysis of the allowance for doubtful accounts reveals: Balance as of 01/01/20XX $ 950 20XX Transactions Provision for Bad Debts 1,275 Recovery of Bad Debts 425 Write-off of Bad Debts (650) Balance as of 12/31/20XX 9. Intangible assets include $20,000 goodwill. Classified: General Business $2,000 10. Soft incurred $6,800 of organizational costs last year. It uses Sec. 248 to amortize its deductions. 11. A comparative balance sheet for Soft reveals the following: ASSETS 1/1/20XX 12/31/20XX Cash $ 15,110 $ 113,798 Accounts Receivable (net of allowance of $950 and $2,000) 4,600 8,400 Inventories 3,250 1,356 Investments 28,000 37,880 Long-Term Investments 28,275 0 Depreciable Assets 321,860 321,860 Accumulated Depreciation (28,968) (67,338) Goodwill 20,000 20,000 Total Assets $392,127 $435,956 Accounts Payable $ 2,450 $ 4,958 Note Payable 335,155 279,955 Common Stock 40,000 40,000 Retained Earnings-Unappropriated 14,522 111,043 Total Liabilities & Equity $392,127 $435,956 LIABILITIES & EQUITY 12. During 20XX, a $10,000 cash distribution was made to the owners (i.e., $7,500 to Delores and $2,500 to Bart.) Classified: General Business 13. Bart and Delores each established a buy-sell agreement with Soft, stipulating that Soft would repurchase the interest owned by either individual at a fair price in the event of their death. To fund the repurchase, Soft acquired a life insurance policy on each of the two individuals and paid $7,500 key-person life insurance premiums during 20XX. 14. Net income per the books was $106,521. Tax expense per the books was $38,296. Assume the same accounting method (hybrid) is used for both book and tax accounting purposes. Assume Soft Software is a C-corporation. Prepare the company’s Federal Form 1120. NOTE: If federal income tax is overpaid, the company wants the overpayment credited to next year’s estimated tax. The company does not want the overpayment refunded. Tax Return Hints FALL 2020 1) GAAP and tax differ for bad debts. Here is a GAAP refresher: a. Provision for Bad Debts Bad Debts Expense xxx Allowance for Doubtful Accounts xxx b. Write-off Allowance for Doubtful Accounts xxx Accounts Receivable xxx c. Subsequent Recovery Accounts Receivable xxx Allowance for Doubtful Accounts Cash xxx xxx Accounts Receivable xxx 2) You may assume the current year’s gross receipts are similar to all prior years 3) Any time you are asked about a 1099 (whether MISC; DIV; B; etc.), say “no” . . . you’ll be glad because it eliminates a lot of additional input!! Classified: General Business 4) You may override the F4562 for the current year depreciation—you do NOT need to complete the depreciation supporting info; there is 1 line item you can override to fix this; if any other information is needed on the F4562 then you SHOULD complete the supporting information 5) M-1—you MAY need to override the “book income” field. 6) You might want to look at Chp. 1 for interest expense; and business meals & entertainment; both of these changed in TCJA. 7) To check for ERRORS there are 2 options a. Drop down –Return/Review/Q&A Review b. Tool Bar– Q&A Review then “Review” tab c. BOTH options will take you through the “alerts” to identify errors Classified: General Business Tax Return – Problem 7: C corporation Instructions: Please complete Express Catering, Inc.’s 2018 Form 1120, U.S. Corporation Income Tax Return, based upon the information provided below. If required information is missing, use reasonable assumptions to fill in the gaps. You may ignore any Alternative Minimum Tax (AMT) calculations and should not prepare any 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 (unchanged since inception), 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 of Incorporation: March 17, 2012 EC’s address has not changed since its inception. 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. EC is owned by four related shareholders from the same family for the entire year: Raphael Giordano (father) and his three children Silvia, Andrea, and Marco. None of EC’s shareholders are non-U.S. persons. There are currently 10,000 shares of EC common stock issued and outstanding (EC has never issued preferred stock). Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Classified: General Business The shareholders are also employees of EC and its only corporate officers. The relevant shareholder and officer information for the current year is provided below. Officer compensation is included in Employee Salaries on the income statement. 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 follows the accrual method of accounting (GAAP) and is not a member of any consolidated or affiliated group of entities. EC is not audited by a CPA firm and has never had to restate its financial statement information. Supplementary Details: • • • • • The dividends received by EC during the year were paid by Apple, Inc. (EC owns less than 20% of Apple, Inc.’s stock). 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, 2015 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, 2015 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. Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Classified: General Business • • • 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. EC acquired the following new fixed assets from unrelated parties in 2018: Description 5-year MACRS Property 7-year MACRS Property Delivery Truck (over 6,000 lbs): 5-year MACRS Property • Date Purchased October 2, 2018 September 10, 2018 Amount $480,000 $320,000 October 12, 2018 $40,000 EC reports employee compensation amounts that remained unpaid at year-end in Accrued Bonuses, Accrued Vacation and Accrued Wages on the balance sheet, as applicable. The table below provides a summary of the balances in these accounts for December 31, 2017 and 2018. Balance Sheet Date Account Description Account Balance Applicable Employees 12/31/2017 Accrued Bonuses $45,000 EC’s Shareholders (father and children) 12/31/2017 Accrued Vacation $62,500 Unrelated Employees 12/31/2017 Accrued Wages $44,500 EC’s Shareholders (father and children) 12/31/2018 Accrued Vacation $73,000 Unrelated Employees 12/31/2018 Accrued Wages $51,500 EC’s Shareholders (father and children) Payment Date 01/20/2018 04/01/2018 – 11/30/2018 01/20/2018 Unpaid as of 03/15/2019 01/22/2019 Supplementary Details (continued): • • • 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 deposit is fully refundable until January 15, 2019. Thereafter, half of the deposit becomes non-refundable. Meal expenses were incurred for clients and EC staff at important meetings where business was conducted. EC did not incur any entertainment-related expenses in 2018. EC values its inventory at cost and has always used the specific identification method for reporting purposes. The company has never written down any inventory for any reason and the rules of Section 263A (UNICAP) do not apply to EC. Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Classified: General Business • • EC made the following estimated Federal income tax payments: o April 15th, 2018: $2,000 o September 15th, 2018: $2,000 o June 15th, 2018: $1,500 o December 15th, 2018 If applicable, EC wants any overpayment credited to its 2019 estimated taxes. Miscellaneous Information: • • • • • • • • • EC did not make any dividend distributions or distributions in excess of current and accumulated earnings and profits during the current year. EC does not have any net operating loss carryforward amounts available for the current year. EC has never issued publicly offered debt instruments. EC is not required to file a Schedule UTP, Uncertain Tax Position Statement. EC made several payments during the current year that were required to be reported on Forms 1099; all required Forms 1099 were filed timely by EC. EC has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or taxdeferred transaction. EC did not receive any assets in Section 351 transfers during the year. All questions on Schedule B, Form 1120 should be checked “no” for the current year. EC’s gross receipts have never exceeded $5 million annually. Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Classified: General Business Express Catering, Inc. Financial Statements (kept on a GAAP basis): Balance Sheet Assets: Cash Accounts Receivable Less: Allowance for Bad Debts Inventory Publicly traded securities Tax-exempt bond U.S. Treasury Bonds Fixed Assets Less: Acc. Depreciation Prepaid Insurance Prepaid Rent Prepaid Advertising Total Assets: 12/31/2017 $ 12/31/2018 62,500 145,000 (32,000) 59,000 100,000 100,000 125,000 2,115,000 (436,500) 0 38,500 0 $ 1,037,000 177,000 (41,000) 96,000 0 0 125,000 2,955,000 (715,000) 15,750 39,500 27,500 $2,276,500 $3,716,750 Liabilities and Shareholders’ Equity: Accounts Payable Accrued Bonuses Accrued Vacation Accrued Wages Event Deposits Income Tax Payable Deferred Tax Liability Note Payable-First Bank of NY (Credit Line) Note Payable-EG Capital Equipment Leasing Capital Stock Additional paid-in Capital Retained Earnings-Unappropriated Total Liabilities and Shareholders’ Equity: 102,000 45,000 62,500 44,500 0 0 45,910 424,000 1,243,000 131,000 0 73,000 51,500 100,000 $46,820 14,000 657,000 1,415,000 1,000 99,000 209,590 1,000 99,000 1,128,430 $2,276,500 $3,716,750 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Classified: General Business Income Statement for the period ending December 31, 2018 Item Amount Income: Gross Sales Less: Returns Net Sales Cost of Goods Sold $ 3,925,000 (8,500) 3,916,500 (1,129,850) Gross Profit 2,786,650 Dividend Income Interest Income -Bank Interest Income-U.S. Treasury Municipal Bond Interest Income Capital Loss-Shares of Apple, Inc. 2,800 150 3,000 1,400 (30,000) Total Income: 2,764,000 Expenses: Employee Salaries Repairs and Maintenance Bad Debts Rent Payroll Taxes Licensing Fees Property Taxes Interest Expense Depreciation Office Supplies Employee Training Employee Benefits Charitable Contribution Advertising Meals Travel Insurance Utilities Telephone Federal income tax expense/(benefit) 743,500 19,000 44,000 230,000 60,000 4,500 12,500 140,000 278,500 5,400 3,600 24,000 8,000 70,000 3,400 600 19,750 142,000 14,500 21,910 Total Expenses: 1,845,160 Net Income (Loss): $918,840 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Classified: General Business Express Catering, Inc. 12/31/2018 Book-Tax Reconciliation Description Revenue from sales Less: Returns Less: Cost of goods sold Gross profit Other Income: Dividend income Interest income-Bank Interest Income-US Treasury Municipal bond interest income Loss on sale of Apple, Inc. stock Total Income Expenses: Employee salaries Employee salaries (Accrued Wages) Employee salaries (Accrued Bonuses) Employee salaries (Accrued Vacation) Repairs and maintenance Bad debts Rent Payroll taxes Licensing fees Property taxes Interest expense Depreciation Office supplies Employee training Employee benefits Charitable contribution (down below) Advertising Meals and entertainment Travel Insurance Utilities Telephone Federal tax (expense)/benefit Total expenses before DRD/NOL/Charitable Taxable income before DRD/NOL/Charitable Book Income (Dr)/Cr 3,925,000 (8,500) (1,129,850) 2,786,650 2,800 150 3,000 1,400 (30,000) 2,764,000 (743,500) (19,000) (44,000) (230,000) (60,000) (4,500) (12,500) (140,000) (278,500) (5,400) (3,600) (24,000) (70,000) (3,400) (600) (19,750) (142,000) (14,500) (21,910) (1,837,160) (Dr) Book-Tax Adjustments (1,400) (44,500) (45,000) (62,500) Taxable Income (Dr)/Cr 3,925,000 (8,500) (1,129,850) 2,786,650 Cr 30,000 51,500 73,000 9,000 (911,500) 1,700 (15,750) 21,910 926,840 33,300 (8,000) 4,670 Taxable income before DRD Dividends received deduction (DRD) Book/taxable income (loss) Classified: General Business # (743,500) 7,000 (45,000) 10,500 (19,000) (35,000) (230,000) (60,000) (4,500) (12,500) (140,000) (1,190,000) (5,400) (3,600) (24,000) (70,000) (1,700) (600) (35,500) (142,000) (14,500) (2,759,300) 33,300 Taxable income for charitable purposes Charitable contribution 2,800 150 3,000 2,792,600 (3,330) 29,970 918,840 (1,400) (1,400) 28,570 (771,000) 1120 Form Department of the Treasury Internal Revenue Service For calendar year 2018 or tax year beginning ending Go to www.irs.gov/Form1120 for instructions and the latest information. A Check if: 1a Consolidated return (attach Form 851) b Life/nonlife consolidated return . . 2 Name . . . . . . Personal holding co. (attach Sch. PH) . . Personal service corp. (see instructions) . . 3 . . . . Schedule M-3 attached . 4 TYPE OR PRINT B Employer identification number 13-9823459 Number, street, and room or suite no. If a P.O. box, see instructions. 257 WEST 55TH AVENUE City or town, state or province, country, and ZIP or foreign postal code Check if: (1) Initial return (2) Income Deductions (See instructions for limitations on deductions.) and Payments Tax, Refundable Credits, D Total assets (see instructions) $ Final return c Balance. Subtract line 1b from line 1a . . . . . . . . . . . . Cost of goods sold (attach Form 1125-A) . . . . . . . . . . 3 Gross profit. Subtract line 2 from line 1c . . . . . . . . . . 4 Dividends and inclusions (Schedule C, line 23, column (a)) . . 5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Gross rents . . . . . . . . . . . . . . . . . . . . . . . . 7 Gross royalties . . . . . . . . . . . . . . . . . . . . . . 8 Capital gain net income (attach Schedule D (Form 1120)) . . (3) Name change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797) . Other income (see instructions-attach statement) . . . . . . . . . . Total income. Add lines 3 through 10 . . . . . . . . . . . . . . . Compensation of officers (see instructions—attach Form 1125-E) . . Salaries and wages (less employment credits) . . . . . . . . . . . . Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . Interest (see instructions) . . . . . . . . . . . . . . . . . . . . . Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,679,750. Address change 3,925,000. 8,500. 1a . . . . . . . . . . . . . . . . . . . (4) . . . . 1c . . . . 2 . . . . 3 . . . . 4 . . . . 5 . . . . 6 . . . . 7 . . . . 8 9 . . . . 9 10 . . . . 10 11 . . . 11 . . . 12 12 13 . . . . 13 14 . . . . 14 15 . . . . 15 16 . . . . 16 17 . . . . 17 18 . . . . 18 19 . . . . 19 . . . . 20 20 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) 21 Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 22 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 23 Pension, profit-sharing, etc., plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 24 Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 25 Reserved for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 26 Other deductions (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 27 Total deductions. Add lines 12 through 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 28 Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11 . . . . 28 29a Net operating loss deduction (see instructions) . . . . . . . . . . . . . . . . 29a b Special deductions (Schedule C, line 24, column (c)) . . . . . . . . . . . . . 29b 1,400. c Add lines 29a and 29b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29c 30 Taxable income. Subtract line 29c from line 28. See instructions . . . . . . . . . . . . . . . . . . . . . . 30 31 Total tax (Schedule J, Part I, line 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 32 2018 net 965 tax liability paid (Schedule J, Part II, line 12) . . . . . . . . . . . . . . . . . . . . . . . . . . 32 33 Total payments, credits, and section 965 net tax liability (Schedule J, Part III, line 23) . . . . . . . . . . . . . 33 34 Estimated tax penalty. See instructions. Check if Form 2220 is attached . . . . . . . . . . . . . . 34 35 Amount owed. If line 33 is smaller than the total of lines 31, 32, and 34, enter amount owed . . . . . . . . . 35 36 Overpayment. If line 33 is larger than the total of lines 31, 32, and 34, enter amount overpaid . . . . . . . . . 36 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,916,500. 1,129,850. 2,786,650. 2,800. 3,150. 2,792,600. 530,000. 241,000. 19,000. 35,000. 230,000. 77,000. 140,000. 3,330. 1,190,000. DO NOT FILE 37 Enter amount from line 36 you want: Credited to 2019 estimated tax Refunded 70,000. 24,000. 203,300. 2,762,630. 29,970. 1,400. 28,570. 6,000. 7,000. 1,000. 1,000. 37 Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Signature of officer Date Print/Type preparer’s name Paid Eval Prep Preparer Firm’s name Use Only Firm’s address Preparer’s signature May the IRS discuss this return with the preparer shown below? See instructions. Yes No X Title Date Check if PTIN self-employed Firm’s EIN Phone no. , For Paperwork Reduction Act Notice, see separate instructions. UYA C Date incorporated New York, NY 10027 E 2018 EXPRESS CATERING, INC. 1a Gross receipts or sales. . . . . . . . . . . . . . . . . . . . . . . . . . . b Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . Sign Here OMB No. 1545-0123 U.S. Corporation Income Tax Return Form 1120 (2018) Form 1120 (2018) EXPRESS CATERING, INC. 13-9823459 Schedule C 1 (b) % (c) Special deductions (a) X (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800. 50 1,400. Dividends from 20%-or-more-owned domestic corporations (other than debt-financed stock) 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . see instructions . . . . 3 Dividends on certain debt-financed stock of domestic and foreign corporations 4 Dividends on certain preferred stock of less-than-20%-owned public utilities . . . . . . 23.3 5 Dividends on certain preferred stock of 20%-or-more-owned public utilities . . . . . . 26.7 6 Dividends from less-than-20%-owned foreign corporations and certain FSCs . . . . . 50 7 Dividends from 20%-or-more-owned foreign corporations and certain FSCs . . . . . . 65 8 Dividends from wholly owned foreign subsidiaries . . . . . . . . . . . . . . . . . . 100 9 Subtotal. Add lines 1 through 8. See instructions for limitations . . . . . . . . . . . 10 2 Dividends from less-than-20%-owned domestic corporations (other than debt-financed stock) 2 (a) Dividends and inclusions Page 2,800. see instructions 1,400. Dividends from domestic corporations received by a small business investment DO NOT FILE company operating under the Small Business Investment Act of 1958 . . . . . . . . . 100 11 Dividends from affiliated group members . . . . . . . . . . . . . . . . . . . . . . 100 12 Dividends from certain FSCs . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 13 Foreign-source portion of dividends received from a specified 10%-owned foreign 14 corporation (excluding hybrid dividends) (see instructions) . . . . . . . . . . . . . . Dividends from foreign corporations not included on line 3, 6, 7, 8, 11, 12, or 13 100 (including any hybrid dividends) . . . . . . . . . . . . . . . . . . . . . . . . . . 15 see instructions Section 965(a) inclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16a Subpart F inclusions derived from the sale by a controlled foreign corporation (CFC) of the stock of a lower-tier foreign corporation treated as a dividend (attach Form(s) 5471) 100 (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b Subpart F inclusions derived from hybrid dividends of tiered corporations (attach Form(s) 5471) (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c Other inclusions from CFCs under subpart F not included on line 15, 16a, 16b, or 17 (attach Form(s) 5471) (see instructions) . . . . . . . . . . . . . . . . . . . . . . 17 Global Intangible Low-Taxed Income (GILTI) (attach Form(s) 5471 and Form 8992) . . 18 Gross-up for foreign taxes deemed paid 19 IC-DISC and former DISC dividends not included on line 1, 2, or 3 . . . . . . . . . . 20 Other dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Deduction for dividends paid on certain preferred stock of public utilities 22 Section 250 deduction (attach Form 8993) . . . . . . . . . . . . . . . . . . . . . Total dividends and inclusions. Add lines 9 through 20. Enter here and on page 1, 23 line 4 24 UYA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800. 1,400. Total special deductions. Add lines 9 through 22, column (c). Enter here and on page 1, line 29b . . . . . . . . . . . . Form 1120 (2018) Form 1120 (2018) Schedule J EXPRESS CATERING, INC. 13-9823459 Page 3 Tax Computation and Payment (see instructions) Part I-Tax Computation 1 Check if the corporation is a member of a controlled group (attach Schedule O (Form 1120)). See instructions 2 Income tax. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 Base erosion minimum tax (attach Form 8991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 Add lines 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5a Foreign tax credit (attach Form 1118) . . . . . . . . . . . . . . . . . . . . . . . . 5a 6,000. 6,000. b Credit from Form 8834 (see instructions) . . . . . . . . . . . . . . . . . . . . . . 5b c General business credit (attach Form 3800) . . . . . . . . . . . . . . . . . . . . . 5c d Credit for prior year minimum tax (attach Form 8827) . . . . . . . . . . . . . . . . 5d e Bond credits from Form 8912 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5e 6 Total credits. Add lines 5a through 5e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7 Subtract line 6 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8 Personal holding company tax (attach Schedule PH (Form 1120)) . . . . . . . . . . . . . . . . . . . . . . . . Recapture of investment credit (attach Form 4255) . . . . . . . . . . . . . . . . . 9a 8 9a b Recapture of low-income housing credit (attach Form 8611) . . . . . . . . . . . . . 9b c Interest due under the look-back method-completed long-term contracts (attach 6,000. Form 8697) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9c d Interest due under the look-back method-income forecast method (attach Form 8866) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9d e Alternative tax on qualifying shipping activities (attach Form 8902) . . . . . . . . . . 9e f Other (see instructions-attach statement) . . . . . . . . . . . . . . . . . . . . . . 9f DO NOT FILE 10 Total. Add lines 9a through 9f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11 Total tax. Add lines 7, 8, and 10. Enter here and on page 1, line 31 . . . . . . . . . . . . . . . . . . . . . . . 11 6,000. Part II-Section 965 Payments (see instructions) . . . . 12 . . . . . . . . . . . . . . 13 21 Total credits. Add lines 20a through 20d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 22 2018 net 965 tax liability from Form 965-B, Part I, column (d), line 2. See instructions . . . . . . . . . . . . . . . 22 23 Total payment, credits, and section 965 net tax liability. Add lines 19, 21, and 22. Enter here and on page 1, 12 2018 net 965 tax liability paid from Form 965-B, Part II, column (k), line 2. Enter here and on page 1, line 32 Part III-Payments, Refundable Credits, and Section 965 Net Tax Liability 13 2017 overpayment credited to 2018 . . . . . . . . . . . . . . . . . . . . . . . 14 2018 estimated tax payments . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2018 refund applied for on Form 4466 . . . . . . . . . . . . . . . . . . . . . 16 Combine lines 13, 14, and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Tax deposited with Form 7004 . . . . . . . . . . . . . . . . . . . . .

Description

For this assignment you will be required to complete Form 1120, U.S. Corporate Income Tax Return, which includes the Schedule M-1, reconciling book/tax income. File 1: Company information provided for formFile 2: Last year example with solution

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Instructions
For this assignment you will be required to complete Form 1120, U.S.
Corporate Income Tax Return, which includes the Schedule M-1,
reconciling book/tax income.
1) The 2019 tax forms are available at IRS.gov. Regardless of whether
you use software or complete the return with *.pdfs,
2) Your completed project should be uploaded as a *.pdf.
3) RUBRIC—you should complete all required forms for the
return. Twenty-five (25) percent of your grade is for the M-1
reconciliation and the other seventy-five (75) percent is for the remainder
of the return. A total of 100 points applies to the return.
Tax Return Problem: Soft Software
Soft Software is a company that develops and markets legal software. In addition, the company
advises law firms on software and hardware purchases, and develops custom software for law
firms. It is owned by Bart G. Rugby (SSN 526-27-0829) and Delores Oldham (SSN 527-035478). Each of the owners works in the business full-time. Delores is the president and owns
75% of the company, while Bart is the vice-president and owns 25% of the company. During,
20XX (where “XX” is the current tax year), Delores received a salary of $115,000. Bart received
$88,000 in salary.
1. Soft software has a calendar year end. Its employer ID number is 37-1407873. Soft
began operations on February 1, last year after acquiring an existing business (see #9
re: goodwill). The company’s address is 6825 Doodle Ct., Ogden, Utah 84201.
Determine Soft’s business activity code (use “other computer related services”).
2. Soft uses the hybrid method of accounting, and values inventory at cost. Beginning
inventory for 20XX (books sold to customers) was $3,250. Soft purchased $5,500 of
inventory during 20XX and ending inventory was $1,356. Soft’s inventory is not subject
to the Uniform Capitalization (i.e., Unicap) rules under Section 263A.
3. Soft received dividends from corporations (in which it owned less than a 20% interest) of
$4,300.
4. Soft sold two stocks during 20XX. The first, Primerica Industries, was purchased on
March 13, 1996 at a price of $8,273. Primerica was sold November 15, 20XX for
$10,000. The second stock, Ukulele, Inc., was purchased on July 5, 1999, for $20,002.
Ukulele was sold on February 26, 20XX, for $8,320.
5. Soft paid estimated tax payments of $18,000 each in April, June, September, and
December. Last year’s total federal income tax was $70,000.
6. The following additional income and deductions were incurred during 20XX. NOTE: Do
not try to resolve that these income items, less deductions, do not equal the taxable
income amount on your F1120. Remember some income and deductions are listed
separately in this scenario. Similarly, do not try to reconcile the below with the ‘book’ net
income that is given.
Classified: General Business
INCOME
Sales
Interest Income from Savings Accounts
Interest Income from municipal bonds
$889,072
18,030
11,207
DEDUCTIONS
Salaries (does not include Delores and Bart)$225,000
Repairs
18,877
Rent
24,000
Taxes (other than federal income tax)
33,666
Interest
28,765
Charitable Contributions
87,000
Advertising
38,500
Business Meals
3,000
Business Entertainment
4,550
Utilities
8,400
Auto Expenses
2,540
NOTE: You should assume all ‘auto limitations’ have already been applied.
Miscellaneous Expenses
36,000
NOTE: Amortization has been intentionally excluded from the list of deductions. I want
you to figure it.
The following additional information is relevant to 20XX:
7. Soft uses straight-line depreciation for book and MACRS for tax. During the year there
were no purchases, dispositions, or changes in estimates for depreciable assets. The
MACRS depreciation for 20XX is $75,200.
8. An analysis of the allowance for doubtful accounts reveals:
Balance as of 01/01/20XX
$ 950
20XX Transactions
Provision for Bad Debts
1,275
Recovery of Bad Debts
425
Write-off of Bad Debts
(650)
Balance as of 12/31/20XX
9. Intangible assets include $20,000 goodwill.
Classified: General Business
$2,000
10. Soft incurred $6,800 of organizational costs last year. It uses Sec. 248 to amortize its
deductions.
11. A comparative balance sheet for Soft reveals the following:
ASSETS
1/1/20XX
12/31/20XX
Cash
$ 15,110
$ 113,798
Accounts Receivable (net of allowance of
$950 and $2,000)
4,600
8,400
Inventories
3,250
1,356
Investments
28,000
37,880
Long-Term Investments
28,275
0
Depreciable Assets
321,860
321,860
Accumulated Depreciation
(28,968)
(67,338)
Goodwill
20,000
20,000
Total Assets
$392,127
$435,956
Accounts Payable
$ 2,450
$ 4,958
Note Payable
335,155
279,955
Common Stock
40,000
40,000
Retained Earnings-Unappropriated
14,522
111,043
Total Liabilities & Equity
$392,127
$435,956
LIABILITIES & EQUITY
12. During 20XX, a $10,000 cash distribution was made to the owners (i.e., $7,500 to
Delores and $2,500 to Bart.)
Classified: General Business
13. Bart and Delores each established a buy-sell agreement with Soft, stipulating that Soft
would repurchase the interest owned by either individual at a fair price in the event of
their death. To fund the repurchase, Soft acquired a life insurance policy on each of the
two individuals and paid $7,500 key-person life insurance premiums during 20XX.
14. Net income per the books was $106,521. Tax expense per the books was $38,296.
Assume the same accounting method (hybrid) is used for both book and tax accounting
purposes.
Assume Soft Software is a C-corporation. Prepare the company’s Federal Form 1120.
NOTE: If federal income tax is overpaid, the company wants the overpayment credited to next
year’s estimated tax. The company does not want the overpayment refunded.
Tax Return Hints
FALL 2020
1) GAAP and tax differ for bad debts. Here is a GAAP refresher:
a. Provision for Bad Debts
Bad Debts Expense
xxx
Allowance for Doubtful Accounts
xxx
b. Write-off
Allowance for Doubtful Accounts xxx
Accounts Receivable
xxx
c. Subsequent Recovery
Accounts Receivable
xxx
Allowance for Doubtful Accounts
Cash
xxx
xxx
Accounts Receivable
xxx
2) You may assume the current year’s gross receipts are similar to all prior years
3) Any time you are asked about a 1099 (whether MISC; DIV; B; etc.), say “no” . . .
you’ll be glad because it eliminates a lot of additional input!!
Classified: General Business
4) You may override the F4562 for the current year depreciation—you do NOT need
to complete the depreciation supporting info; there is 1 line item you can override
to fix this; if any other information is needed on the F4562 then you SHOULD
complete the supporting information
5) M-1—you MAY need to override the “book income” field.
6) You might want to look at Chp. 1 for interest expense; and business meals &
entertainment; both of these changed in TCJA.
7) To check for ERRORS there are 2 options
a. Drop down –Return/Review/Q&A Review
b. Tool Bar– Q&A Review then “Review” tab
c. BOTH options will take you through the “alerts” to identify errors
Classified: General Business
Tax Return – Problem 7: C corporation
Instructions:
Please complete Express Catering, Inc.’s 2018 Form 1120, U.S. Corporation Income Tax Return, based
upon the information provided below. If required information is missing, use reasonable assumptions to
fill in the gaps. You may ignore any Alternative Minimum Tax (AMT) calculations and should not prepare
any 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
(unchanged since inception), 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 of Incorporation: March 17, 2012
EC’s address has not changed since its inception.
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.
EC is owned by four related shareholders from the same family for the entire year: Raphael Giordano
(father) and his three children Silvia, Andrea, and Marco. None of EC’s shareholders are non-U.S.
persons. There are currently 10,000 shares of EC common stock issued and outstanding (EC has never
issued preferred stock).
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Classified: General Business
The shareholders are also employees of EC and its only corporate officers. The relevant shareholder and
officer information for the current year is provided below. Officer compensation is included in
Employee Salaries on the income statement. 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 follows the accrual method of accounting (GAAP) and is not a member of any consolidated or
affiliated group of entities. EC is not audited by a CPA firm and has never had to restate its financial
statement information.
Supplementary Details:
•
•
•
•
•
The dividends received by EC during the year were paid by Apple, Inc. (EC owns less than 20% of
Apple, Inc.’s stock).
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, 2015 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, 2015 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.
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Classified: General Business
•
•
•
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.
EC acquired the following new fixed assets from unrelated parties in 2018:
Description
5-year MACRS Property
7-year MACRS Property
Delivery Truck (over
6,000 lbs): 5-year
MACRS Property
•
Date Purchased
October 2, 2018
September 10, 2018
Amount
$480,000
$320,000
October 12, 2018
$40,000
EC reports employee compensation amounts that remained unpaid at year-end in Accrued
Bonuses, Accrued Vacation and Accrued Wages on the balance sheet, as applicable. The table
below provides a summary of the balances in these accounts for December 31, 2017 and 2018.
Balance
Sheet Date
Account Description
Account Balance
Applicable Employees
12/31/2017
Accrued Bonuses
$45,000
EC’s Shareholders
(father and children)
12/31/2017
Accrued Vacation
$62,500
Unrelated Employees
12/31/2017
Accrued Wages
$44,500
EC’s Shareholders
(father and children)
12/31/2018
Accrued Vacation
$73,000
Unrelated Employees
12/31/2018
Accrued Wages
$51,500
EC’s Shareholders
(father and children)
Payment
Date
01/20/2018
04/01/2018 –
11/30/2018
01/20/2018
Unpaid as of
03/15/2019
01/22/2019
Supplementary Details (continued):
•
•
•
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 deposit is fully refundable until January 15, 2019. Thereafter, half of the deposit becomes
non-refundable.
Meal expenses were incurred for clients and EC staff at important meetings where business was
conducted. EC did not incur any entertainment-related expenses in 2018.
EC values its inventory at cost and has always used the specific identification method for
reporting purposes. The company has never written down any inventory for any reason and the
rules of Section 263A (UNICAP) do not apply to EC.
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Classified: General Business
•
•
EC made the following estimated Federal income tax payments:
o April 15th, 2018: $2,000
o September 15th, 2018: $2,000
o June 15th, 2018: $1,500
o December 15th, 2018
If applicable, EC wants any overpayment credited to its 2019 estimated taxes.
Miscellaneous Information:
•
•
•
•
•
•
•
•
•
EC did not make any dividend distributions or distributions in excess of current and accumulated
earnings and profits during the current year.
EC does not have any net operating loss carryforward amounts available for the current year.
EC has never issued publicly offered debt instruments.
EC is not required to file a Schedule UTP, Uncertain Tax Position Statement.
EC made several payments during the current year that were required to be reported on Forms
1099; all required Forms 1099 were filed timely by EC.
EC has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or taxdeferred transaction.
EC did not receive any assets in Section 351 transfers during the year.
All questions on Schedule B, Form 1120 should be checked “no” for the current year.
EC’s gross receipts have never exceeded $5 million annually.
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Classified: General Business
Express Catering, Inc.
Financial Statements (kept on a GAAP basis):
Balance Sheet
Assets:
Cash
Accounts Receivable
Less: Allowance for Bad Debts
Inventory
Publicly traded securities
Tax-exempt bond
U.S. Treasury Bonds
Fixed Assets
Less: Acc. Depreciation
Prepaid Insurance
Prepaid Rent
Prepaid Advertising
Total Assets:
12/31/2017
$
12/31/2018
62,500
145,000
(32,000)
59,000
100,000
100,000
125,000
2,115,000
(436,500)
0
38,500
0
$ 1,037,000
177,000
(41,000)
96,000
0
0
125,000
2,955,000
(715,000)
15,750
39,500
27,500
$2,276,500
$3,716,750
Liabilities and Shareholders’ Equity:
Accounts Payable
Accrued Bonuses
Accrued Vacation
Accrued Wages
Event Deposits
Income Tax Payable
Deferred Tax Liability
Note Payable-First Bank of NY (Credit Line)
Note Payable-EG Capital Equipment Leasing
Capital Stock
Additional paid-in Capital
Retained Earnings-Unappropriated
Total Liabilities and Shareholders’ Equity:
102,000
45,000
62,500
44,500
0
0
45,910
424,000
1,243,000
131,000
0
73,000
51,500
100,000
$46,820
14,000
657,000
1,415,000
1,000
99,000
209,590
1,000
99,000
1,128,430
$2,276,500
$3,716,750
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Classified: General Business
Income Statement for the period ending December 31, 2018
Item
Amount
Income:
Gross Sales
Less: Returns
Net Sales
Cost of Goods Sold
$ 3,925,000
(8,500)
3,916,500
(1,129,850)
Gross Profit
2,786,650
Dividend Income
Interest Income -Bank
Interest Income-U.S. Treasury
Municipal Bond Interest Income
Capital Loss-Shares of Apple, Inc.
2,800
150
3,000
1,400
(30,000)
Total Income:
2,764,000
Expenses:
Employee Salaries
Repairs and Maintenance
Bad Debts
Rent
Payroll Taxes
Licensing Fees
Property Taxes
Interest Expense
Depreciation
Office Supplies
Employee Training
Employee Benefits
Charitable Contribution
Advertising
Meals
Travel
Insurance
Utilities
Telephone
Federal income tax expense/(benefit)
743,500
19,000
44,000
230,000
60,000
4,500
12,500
140,000
278,500
5,400
3,600
24,000
8,000
70,000
3,400
600
19,750
142,000
14,500
21,910
Total Expenses:
1,845,160
Net Income (Loss):
$918,840
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Classified: General Business
Express Catering, Inc.
12/31/2018
Book-Tax Reconciliation
Description
Revenue from sales
Less: Returns
Less: Cost of goods sold
Gross profit
Other Income:
Dividend income
Interest income-Bank
Interest Income-US Treasury
Municipal bond interest income
Loss on sale of Apple, Inc. stock
Total Income
Expenses:
Employee salaries
Employee salaries (Accrued Wages)
Employee salaries (Accrued Bonuses)
Employee salaries (Accrued Vacation)
Repairs and maintenance
Bad debts
Rent
Payroll taxes
Licensing fees
Property taxes
Interest expense
Depreciation
Office supplies
Employee training
Employee benefits
Charitable contribution (down below)
Advertising
Meals and entertainment
Travel
Insurance
Utilities
Telephone
Federal tax (expense)/benefit
Total expenses before DRD/NOL/Charitable
Taxable income before DRD/NOL/Charitable
Book Income
(Dr)/Cr
3,925,000
(8,500)
(1,129,850)
2,786,650
2,800
150
3,000
1,400
(30,000)
2,764,000
(743,500)
(19,000)
(44,000)
(230,000)
(60,000)
(4,500)
(12,500)
(140,000)
(278,500)
(5,400)
(3,600)
(24,000)
(70,000)
(3,400)
(600)
(19,750)
(142,000)
(14,500)
(21,910)
(1,837,160)
(Dr)
Book-Tax Adjustments
(1,400)
(44,500)
(45,000)
(62,500)
Taxable Income
(Dr)/Cr
3,925,000
(8,500)
(1,129,850)
2,786,650
Cr
30,000
51,500
73,000
9,000
(911,500)
1,700
(15,750)
21,910
926,840
33,300
(8,000)
4,670
Taxable income before DRD
Dividends received deduction (DRD)
Book/taxable income (loss)
Classified: General Business
#
(743,500)
7,000
(45,000)
10,500
(19,000)
(35,000)
(230,000)
(60,000)
(4,500)
(12,500)
(140,000)
(1,190,000)
(5,400)
(3,600)
(24,000)
(70,000)
(1,700)
(600)
(35,500)
(142,000)
(14,500)
(2,759,300)
33,300
Taxable income for charitable purposes
Charitable contribution
2,800
150
3,000
2,792,600
(3,330)
29,970
918,840
(1,400)
(1,400)
28,570
(771,000)
1120
Form
Department of the Treasury
Internal Revenue Service
For calendar year 2018 or tax year beginning
ending
Go to www.irs.gov/Form1120 for instructions and the latest information.
A Check if:
1a Consolidated return
(attach Form 851)
b Life/nonlife consolidated return . .
2
Name
. . .
. . .
Personal holding co.
(attach Sch. PH) . .
Personal service corp.
(see instructions) . .
3
. .
. .
Schedule M-3 attached .
4
TYPE
OR
PRINT
B Employer identification number
13-9823459
Number, street, and room or suite no. If a P.O. box, see instructions.
257 WEST 55TH AVENUE
City or town, state or province, country, and ZIP or foreign postal code
Check if: (1)
Initial return
(2)
Income
Deductions (See instructions for limitations on deductions.)
and Payments
Tax, Refundable Credits,
D Total assets (see instructions)
$
Final return
c Balance. Subtract line 1b from line 1a . . . . . . . . . . . .
Cost of goods sold (attach Form 1125-A) . . . . . . . . . .
3 Gross profit. Subtract line 2 from line 1c . . . . . . . . . .
4 Dividends and inclusions (Schedule C, line 23, column (a)) . .
5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . .
6 Gross rents . . . . . . . . . . . . . . . . . . . . . . . .
7 Gross royalties . . . . . . . . . . . . . . . . . . . . . .
8 Capital gain net income (attach Schedule D (Form 1120)) . .
(3)
Name change
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Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797) .
Other income (see instructions-attach statement) . . . . . . . . . .
Total income. Add lines 3 through 10 . . . . . . . . . . . . . . .
Compensation of officers (see instructions—attach Form 1125-E) . .
Salaries and wages (less employment credits) . . . . . . . . . . . .
Repairs and maintenance . . . . . . . . . . . . . . . . . . . . .
Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . .
Interest (see instructions) . . . . . . . . . . . . . . . . . . . . .
Charitable contributions . . . . . . . . . . . . . . . . . . . . . .
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1b
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2,679,750.
Address change
3,925,000.
8,500.
1a
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(4)
. . . . 1c
. . . . 2
. . . . 3
. . . . 4
. . . . 5
. . . . 6
. . . . 7
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9
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10
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11
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15
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17
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18
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19
. . . . 19
. . . . 20
20 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562)
21 Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 21
22 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 22
23 Pension, profit-sharing, etc., plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 23
24 Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 24
25 Reserved for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 25
26 Other deductions (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 26
27 Total deductions. Add lines 12 through 26 . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
27
28 Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11 . . . . 28
29a Net operating loss deduction (see instructions) . . . . . . . . . . . . . . . . 29a
b Special deductions (Schedule C, line 24, column (c)) . . . . . . . . . . . . . 29b
1,400.
c Add lines 29a and 29b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29c
30 Taxable income. Subtract line 29c from line 28. See instructions . . . . . . . . . . . . . . . . . . . . . . 30
31 Total tax (Schedule J, Part I, line 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
32 2018 net 965 tax liability paid (Schedule J, Part II, line 12) . . . . . . . . . . . . . . . . . . . . . . . . . . 32
33 Total payments, credits, and section 965 net tax liability (Schedule J, Part III, line 23) . . . . . . . . . . . . . 33
34 Estimated tax penalty. See instructions. Check if Form 2220 is attached . . . . . . . . . . . . . .
34
35 Amount owed. If line 33 is smaller than the total of lines 31, 32, and 34, enter amount owed . . . . . . . . . 35
36 Overpayment. If line 33 is larger than the total of lines 31, 32, and 34, enter amount overpaid . . . . . . . . . 36
2
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3,916,500.
1,129,850.
2,786,650.
2,800.
3,150.
2,792,600.
530,000.
241,000.
19,000.
35,000.
230,000.
77,000.
140,000.
3,330.
1,190,000.
DO NOT FILE
37
Enter amount from line 36 you want: Credited to 2019 estimated tax
Refunded
70,000.
24,000.
203,300.
2,762,630.
29,970.
1,400.
28,570.
6,000.
7,000.
1,000.
1,000.
37
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true,
correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
Signature of officer
Date
Print/Type preparer’s name
Paid
Eval Prep
Preparer
Firm’s name
Use Only
Firm’s address
Preparer’s signature
May the IRS discuss this return
with the preparer shown below?
See instructions.
Yes
No
X
Title
Date
Check
if PTIN
self-employed
Firm’s EIN
Phone no.
,
For Paperwork Reduction Act Notice, see separate instructions.
UYA
C Date incorporated
New York, NY 10027
E
2018
EXPRESS CATERING, INC.
1a Gross receipts or sales. . . . . . . . . . . . . . . . . . . . . . . . . . .
b Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . .
Sign
Here
OMB No. 1545-0123
U.S. Corporation Income Tax Return
Form
1120 (2018)
Form 1120 (2018)
EXPRESS CATERING, INC.
13-9823459
Schedule C
1
(b) %
(c) Special deductions
(a) X (b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,800.
50
1,400.
Dividends from 20%-or-more-owned domestic corporations (other than debt-financed
stock)
65
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
see
instructions
. . . .
3
Dividends on certain debt-financed stock of domestic and foreign corporations
4
Dividends on certain preferred stock of less-than-20%-owned public utilities . . . . . .
23.3
5
Dividends on certain preferred stock of 20%-or-more-owned public utilities . . . . . .
26.7
6
Dividends from less-than-20%-owned foreign corporations and certain FSCs . . . . .
50
7
Dividends from 20%-or-more-owned foreign corporations and certain FSCs . . . . . .
65
8
Dividends from wholly owned foreign subsidiaries . . . . . . . . . . . . . . . . . .
100
9
Subtotal. Add lines 1 through 8. See instructions for limitations . . . . . . . . . . .
10
2
Dividends from less-than-20%-owned domestic corporations (other than debt-financed
stock)
2
(a) Dividends and
inclusions
Page
2,800.
see
instructions
1,400.
Dividends from domestic corporations received by a small business investment
DO NOT FILE
company operating under the Small Business Investment Act of 1958 . . . . . . . . .
100
11
Dividends from affiliated group members . . . . . . . . . . . . . . . . . . . . . .
100
12
Dividends from certain FSCs
. . . . . . . . . . . . . . . . . . . . . . . . . . .
100
13
Foreign-source portion of dividends received from a specified 10%-owned foreign
14
corporation (excluding hybrid dividends) (see instructions) . . . . . . . . . . . . . .
Dividends from foreign corporations not included on line 3, 6, 7, 8, 11, 12, or 13
100
(including any hybrid dividends) . . . . . . . . . . . . . . . . . . . . . . . . . .
15
see
instructions
Section 965(a) inclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16a Subpart F inclusions derived from the sale by a controlled foreign corporation (CFC) of
the stock of a lower-tier foreign corporation treated as a dividend (attach Form(s) 5471)
100
(see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b Subpart F inclusions derived from hybrid dividends of tiered corporations (attach Form(s)
5471) (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c Other inclusions from CFCs under subpart F not included on line 15, 16a, 16b, or 17
(attach Form(s) 5471) (see instructions) . . . . . . . . . . . . . . . . . . . . . .
17
Global Intangible Low-Taxed Income (GILTI) (attach Form(s) 5471 and Form 8992) . .
18
Gross-up for foreign taxes deemed paid
19
IC-DISC and former DISC dividends not included on line 1, 2, or 3 . . . . . . . . . .
20
Other dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
Deduction for dividends paid on certain preferred stock of public utilities
22
Section 250 deduction (attach Form 8993) . . . . . . . . . . . . . . . . . . . . .
Total dividends and inclusions. Add lines 9 through 20. Enter here and on page 1,
23
line 4
24
UYA
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,800.
1,400.
Total special deductions. Add lines 9 through 22, column (c). Enter here and on page 1, line 29b . . . . . . . . . . . .
Form
1120 (2018)
Form 1120 (2018)
Schedule J
EXPRESS CATERING, INC.
13-9823459
Page
3
Tax Computation and Payment (see instructions)
Part I-Tax Computation
1
Check if the corporation is a member of a controlled group (attach Schedule O (Form 1120)). See instructions
2
Income tax. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
3
Base erosion minimum tax (attach Form 8991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
4
Add lines 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
5a
Foreign tax credit (attach Form 1118) . . . . . . . . . . . . . . . . . . . . . . . . 5a
6,000.
6,000.
b Credit from Form 8834 (see instructions) . . . . . . . . . . . . . . . . . . . . . . 5b
c General business credit (attach Form 3800) . . . . . . . . . . . . . . . . . . . . . 5c
d Credit for prior year minimum tax (attach Form 8827) . . . . . . . . . . . . . . . . 5d
e Bond credits from Form 8912 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5e
6
Total credits. Add lines 5a through 5e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
7
Subtract line 6 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
8
Personal holding company tax (attach Schedule PH (Form 1120)) . . . . . . . . . . . . . . . . . . . . . . . .
Recapture of investment credit (attach Form 4255) . . . . . . . . . . . . . . . . . 9a
8
9a
b
Recapture of low-income housing credit (attach Form 8611) . . . . . . . . . . . . . 9b
c
Interest due under the look-back method-completed long-term contracts (attach
6,000.
Form 8697) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9c
d
Interest due under the look-back method-income forecast method (attach
Form 8866) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9d
e
Alternative tax on qualifying shipping activities (attach Form 8902) . . . . . . . . . . 9e
f
Other (see instructions-attach statement) . . . . . . . . . . . . . . . . . . . . . . 9f
DO NOT FILE
10
Total. Add lines 9a through 9f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
11
Total tax. Add lines 7, 8, and 10. Enter here and on page 1, line 31 . . . . . . . . . . . . . . . . . . . . . . .
11
6,000.
Part II-Section 965 Payments (see instructions)
. . . .
12
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.
.
.
.
.
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.
.
.
.
.
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.
13
21
Total credits. Add lines 20a through 20d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
22
2018 net 965 tax liability from Form 965-B, Part I, column (d), line 2. See instructions . . . . . . . . . . . . . . .
22
23
Total payment, credits, and section 965 net tax liability. Add lines 19, 21, and 22. Enter here and on page 1,
12
2018 net 965 tax liability paid from Form 965-B, Part II, column (k), line 2. Enter here and on page 1, line 32
Part III-Payments, Refundable Credits, and Section 965 Net Tax Liability
13
2017 overpayment credited to 2018 . . . . . . . . . . . . . . . . . . . . . . .
14
2018 estimated tax payments . . . . . . . . . . . . . . . . . . . . . . . . . .
15
2018 refund applied for on Form 4466 . . . . . . . . . . . . . . . . . . . . .
16
Combine lines 13, 14, and 15 . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Tax deposited with Form 7004 . . . . . . . . . . . . . . . . . . . . .