FORM 1120S â
U.S. INCOME TAX RETURN FOR AN S CORPORATION
On March 12,
1994, Douglas Plastics Co., which is located at 2400 Lakeview Street, Fargo,
North Dakota, 58103, (312) 555-8697, filed an election under Code Sec. 1362(a)
to be treated as an S corporation.
Plastics Co. was incorporated January 1, 1994, under the laws of the State of
North Dakota. It is engaged in the manufacture of plastic products, principally
toys (principal business activity code number 326100). Its employer
identification number is 31-0031258.
In 2013, the
corporation had two equal stockholders and each devoted 100% of their time to
the business. There were no changes in stock own- ership during 2013, and each
stockholder owned 1250 shares of the corporation. One of these stockholders,
Douglas Pratt, served as president.
at 660 Springsteen Street, Fargo, North Dakota 58103. His social security
number is 555-11-6789. The other stockholder, Rickie L. Jones, served as vice
president. He resides at 425 State Street, Fargo, North Dakota, 58103. His
social security number is 555-33-9876. In 2013, Mr. Prattâs compensation was
$50,000 and Mr. Jonesâ compensation was $46,000.
corporation hired the outside firm of ATOZ Accounting Services (EIN 21-7777777)
located at 1120 Main Street in Waytogo, North Dakota, 58103, (701) 555-1120, to
prepare its income tax return on the accrual basis. Dewey Fugim prepared the
return. Mr. Fugim (Preparer Tax Identification Number P12345678) is new to the
firm and Mr. Pratt is uncomfortable with him discussing the tax return with the
IRS without his knowledge and decides not to give him tax return preparer
3, 2012, Douglas acquired molds and patterns at a cost of $12,000. The molds
and patterns are three-year MACRS property depreciated using the 200% declining
balance method and a half-year convention. Bonus depreciation was not claimed
because the assets are used. No Code Sec. 179 expense deduction was taken. The
2013 depreciation deduction on the molds and patterns amounts to $5,333. A
$4,000 depreciation deduction was claimed in 2012.
On June 18,
2011, used but reconditioned seven-year MACRS machinery was acquired at a cost
of $138,500. Douglas elected to depreciate the machinery using the alternative
depreciation method with an 11-year recovery period. No bonus depreciation was
claimed and no Code Sec. 179 expense was elected for this property. The 2013
depreciation deduction on the machinery is $12,591. Accumulated depreciation at
the beginning of 2013 is $18,892.
11, 2013, Douglas acquired seven-year MACRS office furniture and fixtures at a
cost of $4,000. Douglas elects to expense the entire amount under Code Sec.
2, 1997, Douglas acquired a brick storage building at a cost of $110,000. The
building is depreciated using the straight-line method over a 311?2 year life.
The 2013 depreciation deduction on the building amounts to $3,492. Accumulated
depreciation at the beginning of 2013 is $55,729.
30, 2013, Douglas sold machinery for $3,500. The machinery, which is 7-year
MACRS property, was purchased on January 14, 2009 for $10,000 and depreciated
using the 200-percent declining-balance method and a half-year convention.
Accumulated depreciation was $7,323 on the date of sale.
18, 2013, Douglas sold a building for $62,500. The building was acquired on
January 10, 1997, at a cost of $90,000. Douglas has accumulated depreciation on
the building of $45,597 at the beginning of 2013. Also, on January 18, 2013,
the corporation sold the land associated with the building for $13,000. The
land was acquired at a cost of $10,000.
following charitable contributions to 50% organizations located in Fargo, North
Dakota were made by the corporation in 2013. Community Fund, $500: Mercy
Hospital, $500; Congregational Church, $250; and Boy Scouts of America, $250.
corporation made cash distributions of $80,000 on March 12, 2013, and $120,000
on May 5, 2013. The distributions were in proportion to stock holdings.
From 1120S â
corporation sold 100 shares of Nicole Co. stock on January 16, 2013, for
$7,775. Douglas Plastics Co. received a 1099-B reporting that the stock was
purchased on March 12, 1997, for $9,689.
following is the adjusted trial balance of Douglas Plastics Co. as of December
Gross sales $692,759
Returns and allowances $ 7,360
Inventory adjustment 1 6,565
Factory salaries and wages 180,235
Freight expense 950
Factory insurance 4,200
Factory utilities 10,850
Factory water 1,150
Factory payroll taxes 16,110
Factory real estate taxes 5,000
Dividends received (domestic) 2 788
Interest on U. S. obligations 2 2,990
Interest on tax-exempt state bonds 1,635
Expense related to tax-exempt bonds 90
Other interest 2 472
Gross rents 3 4,000
Loss on sale of stock 4 1,914
Gain on sale of building 4 18,216
Gain on sale of land 4 3,000
Gain on sale of machine 4 823
Bad debts 4,500
Motor vehicle tax 100
Employment taxes 11,157
Franchise tax 300
Real property tax 1,680
Charitable contributions 1,500
Employee health insurance costs 34,000
Office supplies 3,760
Meals and entertainment
(subject to 50% limitation) 6,600
Shareholder distributions, 3/12/13
Shareholder distributions, 5/5/13 120,000
Officersâ salaries 96,000
Salaries/wages of salespersons and
office personnel 39,446
Interest paid 13,620
Pension plan contributions 8,805
Closing inventory 125,330
Notes and accounts receivable 19,210
Prepaid insurance 300
North Dakota municipal bonds 30,000
U .S . Series EE Bonds 24,450
100S Nicole Co . Common Stock 9,700
Brick storage building (acquired 1/2/97) 110,000
Factory equipment (acquired 6/18/11) 138,500
Molds and patterns (acquired 1/3/12) 12,000
Furniture and fixtures (acquired 2/11/13) 4,000
Accounts payable 90,749
Short-term notes payable to banks 10,000
Accrued payroll taxes 4,410
Long-term notes payable 210,000
Capital stock 5,000
Accumulated adjustments account
of 1/1/13) 5 190,734
Other adjustments account
(as of 1/1/13) 5 1,640
1 Inventory adjustment:The inventory adjustment figure represents the difference between
the opening inventory and the closing inventory. This figure, as such, will not
appear on the return. The inventories are taken at cost or market, whichever is
lower. There was no change in determining the quantities, cost or valuations
between the opening and closing inventory.
2 Dividends received; U.S. obligations
interest; Other interest:The Nicole Co. dividend
income of $788, the interest earned on the U.S. Series EE Bonds of $2,990, and
the other interest of $472 from Fargo National Bank, is portfolio income. As
such, these items are reported on Schedules K and K-1.
3 Gross rents:The gross rents of $4,000 represent gross income from a rental
activity other than real estate and are reported on Schedules K and K-1. There
were no related expenses.
4 Stock sale loss; Building sale gain;
Land sale gain; Machine sale gain:For purposes of
reporting these items on Form 1120S, it is necessary to first report each of
them either on Schedule D or on Form 4797, as applicable. The capital loss and
any Code Sec. 1231 gain are reported on Schedules K and K-1.
5 Accumulated adjustments account; Other
adjustments account:The amount of the âRetained
earningsâ as reported on Line 24, column (b) of Schedule L is the sum of the
Accumulated Adjustments account and the Other Adjustments account at the
beginning of 2013. Schedule M-2 must be completed to determine the amount
reported on Line 24, column (d) of Schedule L.
The following is a balance sheet for
Douglas Plastics Co. as of December 31, 2012:
Cash $ 50,706
Notes and accounts receivable
Prepaid insurance 530
U .S . Series EE Bonds 10,368
North Dakota municipal bonds 30,000
Loans to shareholders 2,000
200 shares – Nicole Co . â Common 19,389
Buildings and other depreciable assets 360,500
Less: Accumulated depreciation 131,094
Net depreciable assets
Total assets $585,374
Liabilities and Capital
Short-term notes payable to banks 20,000
Accrued payroll taxes 2,095
Long-term notes 210,000
Capital stock 5,000
Accumulated adjustments account 190,734
Other adjustments account 1,640
Total liabilities and capital $585,374
Douglas Plastics Co. filed all other
necessary information and tax returns for 2013, including Form 1096 and Form(s)
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