Entity Tax Return

Topic 8 Entity Tax Return: Check Figures C:11-61

Bottle Up, Inc. Problem C:11-61

Form 1120S, Page 1 -

1. Total income, line 6: $1,011,000

1. Total deductions, line 20*: $938,533

1. You should have values on the following lines: 1a, 1b, 1c, 2, 3, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 18, 19, 20, and 21. Do not complete lines 22-27.

*Attach a schedule to the tax return showing the items and amounts for line 20, other deductions.

1. Be sure you are using Form 1120S and not Forms 1120 or 1065.

1. Remember to use 2019 tax forms. Points will be deducted for 2018 or 2020 forms. Forms can be located at www.irs.gov. Use the “find forms” or search feature. Depending on the time of year, the 2019 forms may be in the “prior year” section.

Form 1120S, Page 2, Schedule B

1. Answer lines 1 – 2 based on the information provided in the problem.

1. Answer no to all items 3-11. If a field does not need to be completed, leave it blank. Points will be deducted for failing to complete this schedule.

Form 1120S, Pages 3 and 4 (i.e., Schedule K) –

1. You should have amounts on the line numbers: 1, 4, 5a, 5b, 8a, 9, 12a, 12b, 12d (include type of item), 15a, 16a, 16c, 16d, 17a, 17b, and 18. Note: Line 1 should be the same as line 21 from page 1.

1. Line 17a should be the investment income items added together. Review the items on page 3 of Sch. K to determine the amount. For line 17b, the amount is provided in the textbook problem.

1. Line 18 should be $122,733.

Form 1120S, Page 4 (Schedule L) –

1. Schedule L – This is the balance sheet copied directly from the case in the textbook. Remember the assets should equal the liabilities and capital. Complete the values for the beginning and end of the year.

Note: Use column (a) for any items where you may have subtotals, such as net accounts receivable or plant assets. For example, line 10a should be $375,434 in column (a) and line 10b should be $161,318 also in column (a) with the net result reported on line 10b in column (b) of $214,116. The items from column (b) are added together (or subtracted, as applicable) to get your total assets, liabilities, and equity.

Form 1120S, Page 5 (Schedules M-1 and M-2) –

1. Schedule M-1 (optional and for extra points)– use the information from the problem to complete this section. Line 8 should be the same net income you report on Page 3, line 18. Line 4 should be $147,862.

1. Do not complete Schedule M-2.

Form 1120S, Schedule D –

Complete the Schedule D for Form 1120S. Use the boxes on line 10 to report the information applicable to the capital transaction, as provided in the problem.

Form 1120S, Form 1125-A –

1. You should have values on lines 1, 2, 3, 5, 6, 7, and 8. Check the applicable boxes for lines 9a, 9e, and 9f.

1. The information to calculate cost of goods sold is found in the problem. Be sure not to double count any expenses you report on 1125-A on page 1 of Form 120S.

Form 1120S, Form 4797 –

1. Report the sale of the Sec. 1231 asset on this form in Part I.

Form 1120S, Schedule K-1 –

1. You should have amounts in the same boxes as you reported on the Schedule K (pages 3 and 4 of Form 1120S).

1. For lines 12, 16 and 17, be sure to include both the amounts and the applicable code. The codes are located on page 2 of the Sch. K-1 form.

1. You are only required to prepare the Schedule K-1 for Herman. It is okay to ignore the second shareholder for purpose of this project.

1. Herman is an individual. He has owned 50% of the S-corporation interest all year. See the tax return project instructions for his address and social security number.

Herman and Rebecca Hiebert

Form 1040 –

Taxable income, line 11b: $302,830a Total owed, line 23: $12,956 (use 2019 tax tables)b,c

______

a For purposes of this assignment, calculate the the Qualified Business Income Deduction. Refer to the instructions for Form 8995 to assist in the calculation of this item. b Ignore the 3.8% net investment income tax for high-wealth individuals. c Remember to take into consideration the items subject to the capital gain tax preference rate when calculating the total tax liability.

Schedule A –

1. For line 9, include the investment interest expense from the S-corporation.

1. On line 11, remember to include the cash contributions from both the taxpayers and the amount allocated from the S-corporation.

Form 8949 -

1. Line 2h (Part II), $14,000

Schedule D –

1. Line 15, $28,333

Schedule E –

1. Line 32, $36,234