The tax return projects consists of preparing a C corporation return, part of an S corporation return, and part of a partnership return. These returns are drawn from problems 4, 6, and 5 in Appendix E of South-Western’s Federal Taxation Comprehensive Volume (2021) with the following additional information. Use 2020 forms.
Requirements
Prepare the federal income tax return on the appropriate IRS forms. (Even if you use a software program, you must turn in manual entries on IRS forms.) Copies of those forms and instructions are available at www.irs.gov. Form 1125-A is required if there is inventory. You will need to prepare pp. 1-6 of the 1120. Also prepare Form 1125-E and Schedule G if necessary. You will not need to prepare (insufficient detail) Form 4562. Please prepare M-1 instead of M-3.
Additional Requirements
Prepare a brief top sheet summarizing the factual information in the format of the tax formula.
Strategy
You might want to start with page 1 of the 1120 and manually make entries (Pencil recommended). You might also want to work out the figures for the tax formula roughly first before beginning the return.
Check Figures
Taxable Income, L. 30 508,000; M-1 line 1 397,320; M-1, line 10 514,000
Check forms: (please include in your return).
Schedule L is book basis, not tax basis.
Grading
Per the syllabus, manual return is 33 points, plus 10 points extra credit.
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S Corporation Return:
Comprehensive Problem (Premium, Inc.)
Required
Prepare Schedule K, M-1, M-2, K-1 (K-1 for George Smith)
Additional Information
1120S page 1 line 21 ordinary business income 639,574
Schedule L
Schedule K complete to following lines:
1, 4, 12a, 16c, 16d, 17a, 18
K-1 (George Smith) complete K-1, including the following lines:
1, 4, 12a, 16c, 16d, 17a, 17v (17v is QBI deduction information: QBI, W-2 wages (given in the problem), UBIA)
Schedule M-2 – line 8 (a) 715,722 (b) 0 (c ) 0 (d) 0
Lines 3 & 5 (a) have separately stated and nondeductibles
Schedule M-2 line 1: (a) 111,148
Schedule M-1 line 1: 704,574; Line 8: 719,574
Partnership return:
Comprehensive Problem (ROCK the Ages LLC), Appendix E
Required
Prepare Schedule K, M-1, M-2 (book basis), K-1 (Ryan Ross). Please prepare M-1 rather than M-3.
Additional Information
1065 page 1 line 22 ordinary business income 979,200; Schedule L is book basis.
Schedule K, complete the following lines:
1, 4a&c, 5, 8, 9a, 12, 13a, 14a, 14c, 18a, 18c, 19a, 20a
Schedule K-1 (Ryan Ross) complete K-1, including the following:
1, 4a&c, 5, 8, 9a, 12, 13a, 14a, 14c, 18a, 18c, 19a, 20a, 20z (20z is QBI deduction information: QBI, W-2 wages, UBIA)
M-1 line 1 840,000 line 9 2,336,800
M-2 line 1 800,000 line 9 640,000
