Melodic Musical Sales, Inc.
XX 2021019 2019 Form 1120
The purpose of Tax Return is to get you acquainted with the Form 1120 and the related supporting forms.
In order to assist you in the preparation of the Tax Return Assignment , I am providing you with the following information:
Current year depreciation on property placed in service before 2019:
Building ($2,000,000 × 0.02564) $ 51,280
Equipment 1 ($250,000 × 0.1249 × 0.5) 15,613
Equipment 2 ($500,000 × 0.1249) 62,450
Trucks ($100,000 × 0.192) 19,200
Total $148,543
Current year depreciation on equipment placed in service in 2019:
Sec. 179 expensing $600,000
Total current-year depreciation $748,543
Capital gains and losses for 2019:
Short-term capital gain on sale of PDQ stock $ 55,000
Long-term capital loss on sale of JSB stock (10,000)
Sale of Equipment 1:
Selling price
$280,000
Cost
$250,000
Minus: Accumulated depreciation
(156,288)
Adjusted basis
(93,712)
Gain recognized
$186,288
Sec. 1245 recapture
$156,288
Sec. 1231 gain
$ 30,000
Underpayment penalty:
Omit Form 2220 and just insert $3,809 penalty on Form 1120, Page 1, Line 33.
Schedule M-3:
Omit this schedule
In reviewing your assignment for completeness, please make sure you fill out all of the following information:
- The information at the top of Form 1120
- Schedule K information including answering questions 1 through 25
- Officers compensation Form 1125-E
- The following forms should be included
- Form 1120
- Schedule D
- Form 8949
- Form 1125-A
- Form 1125-E
- Form 2220
- Form 4562
- Form 4797
Please keep in mind the balance sheet and income statement presented are book basis and not tax basis therefore there will be reconciling items between book and tax that must appear on the Schedule M-1 of form 1120.
I would also like to point out some of the book and tax differences that you need to account for on Schedule M-1 and you hopefully you remember from the introductory tax class as follows:
- Federal income tax
- Deferred income tax
- Tax exempt interest
- Capital losses
- Depreciation differences
- Gain on the sale of equipment
- Officers life insurance premiums
- Bad debt expense
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