58. XYZ is a calendar-year corporation that began business on January 1, 2018. For 2019, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. Required: Identify the book-to-tax adjustments for XYZ. a) Reconcile book income to taxable income and identify each book-tax difference as temporary or permanent. b) Compute XYZ's income tax liability. c) Complete XYZ's Schedule M-1. d) Complete XYZ's Form 1120, page 1 (use the most current form available). Ignore estimated tax penalties when completing this form. e) Determine the quarters for which XYZ is subject to underpayment of estimated tax penalties (see estimated tax information below). XYZ Corp. Income Statement for Current Year Book to Tax Adjustments (D) CE Book Income Taxable income $ 40,000,000 27,000,000 $ 13,000,000 300.000 20.000 14,000 3.000 50.000 $ 13,369,000 Revenue from sales Cost of goods sold Gross profit Other Income: Income from investment in corporate stock Interest income Capital gains fosses) Gain or loss from disposition of foed assets Miscellaneous income Gross Income Expenses: Compensation Stock option compensation Advertising Repairs and maintenance Rent Bad debt expense Depreciation Warranty expenses Charitable donations Meals Goodwill impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Net Income after taxes (7.500.000 (200,000) (1.350.000) 75,000 (22,000) 41,000) (1.400,000) (70,000 (500,000 (18,000) (30,000) 144,000) (140,000) $(11,390,000) $ 1,979,000 (720,000) $ 1,259,000 Notes 1. XYZ owns 30 percent of the outstanding Hobble Corp. (HC) stock. Hobble Corp. reported $1,000,000 of income for the year XYZ accounted for its Investment in HC under the equity method and it recorded its pro rata share of HC's earnings for the year HC ako distributed a $200,000 dividend to XYZ 2. Of the $20,000 intarest Income $5.000 was from a City of Seattle bond issued in 2018 that was used to fund public activities, $7,000 was from a Tacoma City bond issued in 2017. $6,000 was from a fully taxable corporate bond, and the remaining $2,000 was from a money market account 3. This gain is from equipment that XYZ purchased in February and sold in December does not quality as 51221 gain 4. This includes total officer compensation of $2.500,000 in one oficer received more than $1,000,000 compensation 5. This amount is the portion of Incentivestock option compensation that was expensed during the year frecipients are officers 6.XYZ actually wrote off $27.000 of accounts receivable as uncollectible 7. Tax depreciation was $1.900.000 8. In the current year, XYZ did not make any actual payments on warrantiest provided to customers. 9. XYZ made $500,000 of cash contributions to qualified charties during the year 10. On July 1 of this year XYZ acquired the assots of another business. In the process it acquired $200.000 of goodwill At the end of the year XYZ wrote off $20,000 of the goodwill as impaired. 11. XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12. The other expenses do not contain any items with book-tax differences 13. This is an estimated tax provision federal tax expense) for the year. Assume that XYZ is not subject to state income taxes Estimated Tax Information XYZ made four equal estimated tax payments totaling $480,000. For purposes of esti- mated tax liabilities, assume XYZ reported a tax liability of $800,000 in 2018. During 2019, XYZ determined its taxable income at the end of each of the four quarters as follows: Cumulative Taxable Income (Loss) Quarter-End First Second Third $ 350,000 800,000 1,000,000 Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. Form 1120 Income 13 15 H nts . . . - 16 - - 17 U.S. Corporation Income Tax Return OMB No. 1545-0123 For calendar year 2019 or tax year beginning 2019, ending __:20 -- Department of the Treasury 2019 Internal Revenue Service Go to www.irs.gov/Form1120 for instructions and the latest information. A Check if: B Employer identification number 1a Consolidated return lattach Form 851) O TYPE b Lifaonio consoli Number, street, and room or suite no. If a P.O.box, see instructions. c Date incorporated dated return OR 2 Personal holding co. PRINT attach Soh.PH. U City or town, state or province, country, and ZIP or foreign postal code D Total assets (see instructions) 3 Personal service o n se instructions) L 4 Schedula M-3 attachado E Check it: 0 Initial return (2) Final return 3 Name change 4 Address change 1a Gross receipts or sales .. . . . . . . . . . . . 1a . . b Returns and allowances. . . . . . . . . . . . . . . . 1b c Balance Subtract line 1b from line 1 , . . . . . . . . . . . . . . . . . . . 2 Cost of goods sold (attach Form 1125-A) . . . . . . . . . . . . . . 3 Gross profit. Subtract line 2 from line 10 . . . . . . . . . . . . Dividends and inclusions (Schedule C, line 23) .. . . . Interest . . . . . . . . . . . . . . . . . . . . . . Gross rents . . . . . . . . . . . . . . . . . . . . . . . . 7 Gross royalties . . . . . . . . . . . . . . . . . . . . . . . 8 Capital gain net income (attach Schedule D (Form 1120]).... . . . . . . 9 Net gain or loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . Other income (see instructions-attach statement). . . . . . . . . . . . 11 Total income. Add lines 3 through 10 . . 11 Compensation of officers (see instructions-attach Form 1125-E) . . . . . . . . . . . - 12 Salaries and wages (less employment credits) . . . . . . . . . - Repairs and maintenance . . . . . . . . . . . . . . . . . . . . 14 Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . e . . . . . . - - . - - - Taxes and licenses . . . . . . . . . . . . . . . . . . . Interest (see instructions) . . . . . . . 18 Charitable contributions. 19 . . . . . . . . . 20 20 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562).. Depletion . . . . . . . . . . . . . . . . . . . . . . - Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Pension, profit-sharing, etc., plans . . . . . . . . . . . . . . . . . . . . . Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . Reserved for future use. . . . . . . . . . . . . . . . . . . . . . . . . 26 Other deductions (attach statement). . . . . . . . . . . . . . . . . . . . . 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) . . . . . . . . . . . . . 29b c Add lines 29 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 2019 net 965 tax liability paid (Schedule J, Part II, line 12). . . . . . . . . . . . . . . . 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 . . . . . . . . . . 35 Amount owed. If line 33 is smaller than the total of lines 31, 32, and 34, enter amount owed . . . . 36 Overpayment. If line 33 is larger than the total of lines 31, 32, and 34, enter amount overpaid. . . . . 36 Enter amount from line 36 you want: Credited to 2020 estimated tax Befunded 37 Under penalties of perjury, I declare that I have carined this return, including accompanying schedules and statements, and to the best of my knowledge and bollet, t is true, correct Sign and completa. Declaration of preparer other than taxpayers based on all Information of which preparer has any knowledge. May the IRS discuss this ratum with the preparar shown below? Herel See instructions. Yos No Signature of officer Date Print/Type preparer's name Preparer's signature Paid self-employed Preparer Firm's EIN Use Only Firm's name Firm's address For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 114500 Form 1120 (2019) Deductions (See instructions for limitations on deductions) 26 Tas, Refundabb Ceds, and Paw 34 35 37 Teie - PTIN Check 1 Page 2 (c) Special deductions (a) Dividends and inclusions Form 1120 (2019) Schedule C Dividends, Inclusions, and Special Deductions (see instructions) 1 Dividends from less-than-20%-owned domestic corporations (other than debt-financed stock) . . . . . . . . . . . . . . . 2 Dividends from 20%-or-more-owned domestic corporations (other than debt-financed stock) . . . . . . . . . . . . . . . . . . . . . . . . 65 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... 7 Dividends from 20%-or-more-owned foreign corporations and certain FSCs . . . 8 Dividends from wholly owned foreign subsidiaries . . . . . . 100 Instructions 9 10 Subtotal. Add lines 1 through 8. See instructions for limitations .... . . Dividends from domestic corporations received by a small business investment company operating under the Small Business Investment Act of 1958 . . . . . 100 11 Dividends from affiliated group members . . . . . . . . . . . . . . 100 100 12 13 Dividends from certain FSCs . . . . . . . . . . . . . . . . . Foreign-source portion of dividends received from a specified 10%-owned foreign corporation (excluding hybrid dividends) (see instructions)... . . . Dividends from foreign corporations not included on line 3, 6, 7, 8, 11, 12, or 13 (including any hybrid dividends) . . . . . . . . . . . . . . . . . 100 Instructions 15 16a 100 Section 965(a) inclusion . . . . . . . . . . . . . . . . . . . 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) (see instructions) . . . . . . . . . . . . . . . . . . . . . Subpart F inclusions derived from hybrid dividends of tiered corporations (attach Form(s) 5471) (see instructions) .. . . Other inclusions from CFCs under subpart F not included on line 15, 16a, 16b, or 17 lattach Form(s) 5471) (see instructions). . . . . . . . . . . . . . . b 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 23 Section 250 deduction (attach Form 8993) . . . . . . . . . . .. . Total dividends and inclusions. Add column (a), lines 9 through 20. Enter here and on page 1. line 4 . . . . . . . . . . . . . . . . . . . . . . Total special deductions. Add column (c), lines 9 through 22. Enter here and on page 1, line 29b 24 . . . . . Form 1120 (2019) Page 3 1 . i 8 Ob Form 1120 (2019) Schedule J Tax Computation and Payment (see instructions) Part I-Tax Computation 1 Check if the corporation is a member of a controlled group (attach Schedule 0 Form 1120)). See instructions 2 Income tax. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . 3 Base erosion minimum tax amount (attach Form 8991) . . . . . . . . . . . . . . . . . . 4 Add lines 2 and 3 . . . . . . . . . . . . . . . . . . Is 5a Foreign tax credit (attach Form 1118). . . . . . . . . . . . . . . b Credit from Form 8834 (see instructions) . . . . . . . c General business credit (attach Form 3800). . . . . . d Credit for prior year minimum tax (attach Form 8827) . . . e Bond credits from Form 8912 . . . . . . . . . . 6 Total credits. Add lines 5a through 5e . . .. . .. 7 Subtract line 6 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . 8 Personal holding company tax (attach Schedule PH (Form 1120)) . . . . . . 9a Recapture of investment credit (attach Form 4255) .. .. .. . ... . 9a b Recapture of low-income housing credit (attach Form 8611). . . . . . . c Interest due under the look back method-completed long-term contracts (attach 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) .. .. .. Se f Other (see instructions-attach statement) . . . . . . . . . .. . of 10 Total. Add lines 9a through gf . . . . . . . . . . . . . . . . . . . . . . . . . 11 Total tax. Add lines 7, 8, and 10. Enter here and on page 1, line 31. . . . . . . . . . . . . . Part II-Section 965 Payments (see instructions) 12 2019 net 965 tax liability paid from Form 965-8, Part II, column (k), line 3. Enter here and on page 1, line 32 - . Part III-Payments, Refundable Credits, and Section 965 Net Tax Liability 13 2018 overpayment credited to 2019 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2019 estimated tax payments . . . . - . . . . . . . . . . . . . . . . . 15 2019 refund applied for on Form 4466 . . . . . . . . . 16 Combine lines 13, 14, and 15 . . . . . . . 17 Tax deposited with Form 7004. . . . . .. . . 18 Withholding (see instructions) . .. . . . . . . 19 Total payments. Add lines 16, 17, and 18 . .. . .. 20 Refundable credits from: a Form 2439. . . . . . . . b Form 4136 . . . . . . . . . . . . . . . . . . . . . . . Form BB27, line 5c . . . . . . . . . . . . . . . . . . . . 20c d Other (attach statement-see instructions) . . . . . . . . 200 21 Total credits. Add lines 20a through 20d.. . 22 2019 net 965 tax liability from Form 965-B, Part I, column (d), line 3. See instructions . . . .... 23 Total payments, credits, and section 965 net tax liability. Add lines 19, 21, and 22. Enter here and on page 1, line 33 11 20a 206 22 | 23 Form 1120 (2019) Page 4 For 1120 (2019) Schedule K Other Information (see instructions) 1 Check accounting method: a Cash b Accrual c Other (specify) 2 See the instructions and enter the: a Business activity code no. b Business activity c Product or service 3 is the corporation a subsidiary in an affiliated group or a parent-subsidiary controlled group? If "Yes,"enter name and EIN of the parent corporation . . . . . 4 a b At the end of the tax year: Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or tax-exempt organization own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of the corporation's stock entitled to vote? If "Yes," complete Part 1 of Schedule G (Form 1120) (attach Schedule G). . . . . Did any individual or estate own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of the corporation's stock entitled to vote? If "Yes," complete Part II of Schedule G (Form 1120) (attach Schedule G . At the end of the tax year, did the corporation: Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of stock entitled to vote of any foreign or domestic corporation not included on Form 851, Affiliations Schedule? For rules of constructive ownership, see instructions. If "Yes," complete through (iv) below. in Country of iv) Percentage Name of Corporation Identification Number Incorporation Owned in Voting (if any) 5 a Employer b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If "Yes," complete through (iv) below. ii) Country of M] Maximum Name of Entity Identification Number Organization Percentage Owned in of Capital fif any 6 During this tax year, did the corporation pay dividends (other than stock dividends and distributions in exchange for stock) in excess of the corporation's current and accumulated earnings and profits? See sections 301 and 316 . . . . . . . . If "Yes," file Form 5452, Corporate Report of Nondividend Distributions. See the instructions for Form 5452 If this is a consolidated return, answer here for the parent corporation and on Form 851 for each subsidiary. At any time during the tax year, did one foreign person own, directly or indirectly, at least 25% of the total voting power of all classes of the corporation's stock entitled to vote or at least 25% of the total value of all classes of the corporation's stock? . For rules of attribution, see section 318. If "Yes,"enter: (a) Percentage owned - and (b) Owner's country (c) The corporation may have to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. Enter the number of Forms 5472 attached Check this box if the corporation issued publicly offered debt instruments with original issue discount... . . . If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. Enter the amount of tax-exempt interest received or accrued during the tax year $ Enter the number of shareholders at the end of the tax year (if 100 or fewer) If the corporation has an NOL for the tax year and is electing to forego the carryback period, check here (see instructions) U If the corporation is filing a consolidated return, the statement required by Regulations section 1.1502-21(b)(3) must be attached or the election will not be valid. Enter the available NOL carryover from prior tax years (do not reduce it by any deduction reported on page 1. line 29a.) . . . . . . . . . . . . . . . . . Form 1120 (2019) 8 9 10 11 12 Page 5 Yes No Form 1120 (2019) Schedule K Other Information (continued from page 4) od of the 13 Are the corporation's total receipts (page 1, line 1a, plus lines 4 through 10) for the tax year and its total assets at the end of the tax year less than $250,000? . . . . . . . . . . . . . . . . . . . . . . . . . . . . If "Yes," the corporation is not required to complete Schedules L, M-1, and M-2. Instead, enter the total amount of cash distributions and the book value of property distributions (other than cash) made during the tax year $ 14 is the corporation required to file Schedule UTP (Form 1120), Uncertain Tax Position Statement? See instructions . . . . If "Yes, complete and attach Schedule UTP. 15a Did the corporation make any payments in 2019 that would require it to file Form(s) 1099? . . . . . . . . . . . b f "Yes," did or will the corporation file required Form(s) 1099?. . . . . . . . . 16 During this tax year, did the corporation have an 80%-or-more change in ownership, including a change due to redemption of its own stock? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . During or subsequent to this tax year, but before the filing of this return, did the corporation dispose of more than 65% (by value) of its assets in a taxable, non-taxable, or tax deferred transaction? . . . . . . . . . . . . . 18 Did the corporation receive assets in a section 351 transfer in which any of the transferred assets had a fair market basis or fair market value of more than $1 million? . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 During the corporation's tax year. did the corporation make any payments that would require it to file Forms 1042 and 1042-S under chapter 3 sections 1441 through 1464) or chapter 4 (sections 1471 through 1474) of the Code? . . . . . . . . 20 is the corporation operating on a cooperative basis?. . . . . . . . . . . . . . . . . . . . . . . During the tax year, did the corporation pay or accrue any interest or royalty for which the deduction is not allowed under section 267A? See instructions If "Yes, enter the total amount of the disallowed deductions $ Does the corporation have gross receipts of at least $500 million in any of the 3 preceding tax years? (See sections 59Alex2) and (3). . . . . . If "Yes," complete and attach Form 1991. 23 Did the corporation have an election under section 163() for any real property trade or business or any farming business in effect during the tax year? See instructions .. . . . . 24 Does the corporation satisfy one or more of the following? See instructions. . . . . . . . . . . . . . . . a The corporation owns a pass-through entity with current, or prior year carryover, excess business interest expense. b The corporation's aggregate average annual gross receipts (determined under section 448(c)) for the 3 tax years preceding the current tax year are more than $26 million and the corporation has business interest expense. c The corporation is a tax shelter and the corporation has business interest expense. If "Yes, to any, complete and attach Form 8990. 25 is the corporation attaching Form 8998 to certify as a Qualified Opportunity Fund?.. . . . . . . . . . . . . If "Yes, enter amount from Form 1996, line 14 - . . . $ Form 1120 (2018) Form 1120 (2019) Page 6 Schedule L Balance Sheets per Books Beginning of tax year End of tax year Assets 1 Cash - . . . . . . . . . . . 2a Trade notes and accounts receivable... b Less allowance for bad debts . . . . 3 Inventories . . . . . . . . . . . 4 U.S. government obligations . . . . . 5 Tax-exempt securities (see instructions).. 6 Other current assets (attach statement) . . Loans to shareholders . . . . . . . 8 Mortgage and real estate loans . . . . . 9 Other investments (attach statement) . . 10a Buildings and other depreciable assets . . b Less accumulated depreciation..... 11a Depletable assets. . . . . . . . . b Less accumulated depletion . . . . . . 12 Land (net of any amortization). . . 13a Intangible assets (amortizable only) .. . b Less accumulated amortization . . .. . 14 Other assets (attach statement). .... 15 Total assets . Liabilities and Shareholders' Equity 16 Accounts payable . . . . . . . . . 17 Mortgages, notes, bonds payable in less than 1 year 18 Other current liabilities (attach statement) . 19 Loans from shareholders. .. . .. . 20 Mortgages, notes, bonds pavable in 1 year or more 21 Other abilities attach statement) . . Capital stock: a Preferred stock bCommon stock - . . . T 23 Additional paid-in capital. 24 Retained earnings-Appropriated (attach statement) 25 Retained earnings-Unappropriated . . . I T 26 Adjustments to shareholders' equity attach statement 27 Less cost of treasury stock . . . . . . 28 Total liabilities and shareholders' equity . Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return Note: The corporation may be required to file Schedule M-3. See instructions. 1 Net income loss) per books. Income recorded on books this year 2 Federal income tax per books... not included on this return (itemize): 3 Excess of capital losses over capital gains . Tax-exempt interest $ 4 Income subject to tax not recorded on books this year [itemize): Deductions on this retum not charged against book income this year (itemize): 5 Expenses recorded on books this year not deducted on this return (itemize): a Depreciation - S a Depreciation . . b Charitable contributions S b Charitable contributions. $ c Travel and entertainment. $ 9 Add lines 7 and 8. . . . 6 Add lines 1 through 5. . . . . 10 Income (page 1, line 28) - line 6 less line 9 Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L) 1 Balance at beginning of year . . 5 .. Distributions: a Cash . . . . . 2 b Stock Net income (loss) per books . . . . . . . . . . 3 Other increases (itemize): Property. . . . 6 Other decreases (itemize 7 Add lines 5 and 6. .. . . . 4 Add lines 1, 2, and 3. . . . . . 8 Balance at end of year (line 4 less line 7) Form 1120 (2018) 58. XYZ is a calendar-year corporation that began business on January 1, 2018. For 2019, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. Required: Identify the book-to-tax adjustments for XYZ. a) Reconcile book income to taxable income and identify each book-tax difference as temporary or permanent. b) Compute XYZ's income tax liability. c) Complete XYZ's Schedule M-1. d) Complete XYZ's Form 1120, page 1 (use the most current form available). Ignore estimated tax penalties when completing this form. e) Determine the quarters for which XYZ is subject to underpayment of estimated tax penalties (see estimated tax information below). XYZ Corp. Income Statement for Current Year Book to Tax Adjustments (D) CE Book Income Taxable income $ 40,000,000 27,000,000 $ 13,000,000 300.000 20.000 14,000 3.000 50.000 $ 13,369,000 Revenue from sales Cost of goods sold Gross profit Other Income: Income from investment in corporate stock Interest income Capital gains fosses) Gain or loss from disposition of foed assets Miscellaneous income Gross Income Expenses: Compensation Stock option compensation Advertising Repairs and maintenance Rent Bad debt expense Depreciation Warranty expenses Charitable donations Meals Goodwill impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Net Income after taxes (7.500.000 (200,000) (1.350.000) 75,000 (22,000) 41,000) (1.400,000) (70,000 (500,000 (18,000) (30,000) 144,000) (140,000) $(11,390,000) $ 1,979,000 (720,000) $ 1,259,000 Notes 1. XYZ owns 30 percent of the outstanding Hobble Corp. (HC) stock. Hobble Corp. reported $1,000,000 of income for the year XYZ accounted for its Investment in HC under the equity method and it recorded its pro rata share of HC's earnings for the year HC ako distributed a $200,000 dividend to XYZ 2. Of the $20,000 intarest Income $5.000 was from a City of Seattle bond issued in 2018 that was used to fund public activities, $7,000 was from a Tacoma City bond issued in 2017. $6,000 was from a fully taxable corporate bond, and the remaining $2,000 was from a money market account 3. This gain is from equipment that XYZ purchased in February and sold in December does not quality as 51221 gain 4. This includes total officer compensation of $2.500,000 in one oficer received more than $1,000,000 compensation 5. This amount is the portion of Incentivestock option compensation that was expensed during the year frecipients are officers 6.XYZ actually wrote off $27.000 of accounts receivable as uncollectible 7. Tax depreciation was $1.900.000 8. In the current year, XYZ did not make any actual payments on warrantiest provided to customers. 9. XYZ made $500,000 of cash contributions to qualified charties during the year 10. On July 1 of this year XYZ acquired the assots of another business. In the process it acquired $200.000 of goodwill At the end of the year XYZ wrote off $20,000 of the goodwill as impaired. 11. XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12. The other expenses do not contain any items with book-tax differences 13. This is an estimated tax provision federal tax expense) for the year. Assume that XYZ is not subject to state income taxes Estimated Tax Information XYZ made four equal estimated tax payments totaling $480,000. For purposes of esti- mated tax liabilities, assume XYZ reported a tax liability of $800,000 in 2018. During 2019, XYZ determined its taxable income at the end of each of the four quarters as follows: Cumulative Taxable Income (Loss) Quarter-End First Second Third $ 350,000 800,000 1,000,000 Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. Form 1120 Income 13 15 H nts . . . - 16 - - 17 U.S. Corporation Income Tax Return OMB No. 1545-0123 For calendar year 2019 or tax year beginning 2019, ending __:20 -- Department of the Treasury 2019 Internal Revenue Service Go to www.irs.gov/Form1120 for instructions and the latest information. A Check if: B Employer identification number 1a Consolidated return lattach Form 851) O TYPE b Lifaonio consoli Number, street, and room or suite no. If a P.O.box, see instructions. c Date incorporated dated return OR 2 Personal holding co. PRINT attach Soh.PH. U City or town, state or province, country, and ZIP or foreign postal code D Total assets (see instructions) 3 Personal service o n se instructions) L 4 Schedula M-3 attachado E Check it: 0 Initial return (2) Final return 3 Name change 4 Address change 1a Gross receipts or sales .. . . . . . . . . . . . 1a . . b Returns and allowances. . . . . . . . . . . . . . . . 1b c Balance Subtract line 1b from line 1 , . . . . . . . . . . . . . . . . . . . 2 Cost of goods sold (attach Form 1125-A) . . . . . . . . . . . . . . 3 Gross profit. Subtract line 2 from line 10 . . . . . . . . . . . . Dividends and inclusions (Schedule C, line 23) .. . . . Interest . . . . . . . . . . . . . . . . . . . . . . Gross rents . . . . . . . . . . . . . . . . . . . . . . . . 7 Gross royalties . . . . . . . . . . . . . . . . . . . . . . . 8 Capital gain net income (attach Schedule D (Form 1120]).... . . . . . . 9 Net gain or loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . Other income (see instructions-attach statement). . . . . . . . . . . . 11 Total income. Add lines 3 through 10 . . 11 Compensation of officers (see instructions-attach Form 1125-E) . . . . . . . . . . . - 12 Salaries and wages (less employment credits) . . . . . . . . . - Repairs and maintenance . . . . . . . . . . . . . . . . . . . . 14 Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . e . . . . . . - - . - - - Taxes and licenses . . . . . . . . . . . . . . . . . . . Interest (see instructions) . . . . . . . 18 Charitable contributions. 19 . . . . . . . . . 20 20 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562).. Depletion . . . . . . . . . . . . . . . . . . . . . . - Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Pension, profit-sharing, etc., plans . . . . . . . . . . . . . . . . . . . . . Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . Reserved for future use. . . . . . . . . . . . . . . . . . . . . . . . . 26 Other deductions (attach statement). . . . . . . . . . . . . . . . . . . . . 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) . . . . . . . . . . . . . 29b c Add lines 29 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 2019 net 965 tax liability paid (Schedule J, Part II, line 12). . . . . . . . . . . . . . . . 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 . . . . . . . . . . 35 Amount owed. If line 33 is smaller than the total of lines 31, 32, and 34, enter amount owed . . . . 36 Overpayment. If line 33 is larger than the total of lines 31, 32, and 34, enter amount overpaid. . . . . 36 Enter amount from line 36 you want: Credited to 2020 estimated tax Befunded 37 Under penalties of perjury, I declare that I have carined this return, including accompanying schedules and statements, and to the best of my knowledge and bollet, t is true, correct Sign and completa. Declaration of preparer other than taxpayers based on all Information of which preparer has any knowledge. May the IRS discuss this ratum with the preparar shown below? Herel See instructions. Yos No Signature of officer Date Print/Type preparer's name Preparer's signature Paid self-employed Preparer Firm's EIN Use Only Firm's name Firm's address For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 114500 Form 1120 (2019) Deductions (See instructions for limitations on deductions) 26 Tas, Refundabb Ceds, and Paw 34 35 37 Teie - PTIN Check 1 Page 2 (c) Special deductions (a) Dividends and inclusions Form 1120 (2019) Schedule C Dividends, Inclusions, and Special Deductions (see instructions) 1 Dividends from less-than-20%-owned domestic corporations (other than debt-financed stock) . . . . . . . . . . . . . . . 2 Dividends from 20%-or-more-owned domestic corporations (other than debt-financed stock) . . . . . . . . . . . . . . . . . . . . . . . . 65 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... 7 Dividends from 20%-or-more-owned foreign corporations and certain FSCs . . . 8 Dividends from wholly owned foreign subsidiaries . . . . . . 100 Instructions 9 10 Subtotal. Add lines 1 through 8. See instructions for limitations .... . . Dividends from domestic corporations received by a small business investment company operating under the Small Business Investment Act of 1958 . . . . . 100 11 Dividends from affiliated group members . . . . . . . . . . . . . . 100 100 12 13 Dividends from certain FSCs . . . . . . . . . . . . . . . . . Foreign-source portion of dividends received from a specified 10%-owned foreign corporation (excluding hybrid dividends) (see instructions)... . . . Dividends from foreign corporations not included on line 3, 6, 7, 8, 11, 12, or 13 (including any hybrid dividends) . . . . . . . . . . . . . . . . . 100 Instructions 15 16a 100 Section 965(a) inclusion . . . . . . . . . . . . . . . . . . . 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) (see instructions) . . . . . . . . . . . . . . . . . . . . . Subpart F inclusions derived from hybrid dividends of tiered corporations (attach Form(s) 5471) (see instructions) .. . . Other inclusions from CFCs under subpart F not included on line 15, 16a, 16b, or 17 lattach Form(s) 5471) (see instructions). . . . . . . . . . . . . . . b 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 23 Section 250 deduction (attach Form 8993) . . . . . . . . . . .. . Total dividends and inclusions. Add column (a), lines 9 through 20. Enter here and on page 1. line 4 . . . . . . . . . . . . . . . . . . . . . . Total special deductions. Add column (c), lines 9 through 22. Enter here and on page 1, line 29b 24 . . . . . Form 1120 (2019) Page 3 1 . i 8 Ob Form 1120 (2019) Schedule J Tax Computation and Payment (see instructions) Part I-Tax Computation 1 Check if the corporation is a member of a controlled group (attach Schedule 0 Form 1120)). See instructions 2 Income tax. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . 3 Base erosion minimum tax amount (attach Form 8991) . . . . . . . . . . . . . . . . . . 4 Add lines 2 and 3 . . . . . . . . . . . . . . . . . . Is 5a Foreign tax credit (attach Form 1118). . . . . . . . . . . . . . . b Credit from Form 8834 (see instructions) . . . . . . . c General business credit (attach Form 3800). . . . . . d Credit for prior year minimum tax (attach Form 8827) . . . e Bond credits from Form 8912 . . . . . . . . . . 6 Total credits. Add lines 5a through 5e . . .. . .. 7 Subtract line 6 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . 8 Personal holding company tax (attach Schedule PH (Form 1120)) . . . . . . 9a Recapture of investment credit (attach Form 4255) .. .. .. . ... . 9a b Recapture of low-income housing credit (attach Form 8611). . . . . . . c Interest due under the look back method-completed long-term contracts (attach 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) .. .. .. Se f Other (see instructions-attach statement) . . . . . . . . . .. . of 10 Total. Add lines 9a through gf . . . . . . . . . . . . . . . . . . . . . . . . . 11 Total tax. Add lines 7, 8, and 10. Enter here and on page 1, line 31. . . . . . . . . . . . . . Part II-Section 965 Payments (see instructions) 12 2019 net 965 tax liability paid from Form 965-8, Part II, column (k), line 3. Enter here and on page 1, line 32 - . Part III-Payments, Refundable Credits, and Section 965 Net Tax Liability 13 2018 overpayment credited to 2019 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2019 estimated tax payments . . . . - . . . . . . . . . . . . . . . . . 15 2019 refund applied for on Form 4466 . . . . . . . . . 16 Combine lines 13, 14, and 15 . . . . . . . 17 Tax deposited with Form 7004. . . . . .. . . 18 Withholding (see instructions) . .. . . . . . . 19 Total payments. Add lines 16, 17, and 18 . .. . .. 20 Refundable credits from: a Form 2439. . . . . . . . b Form 4136 . . . . . . . . . . . . . . . . . . . . . . . Form BB27, line 5c . . . . . . . . . . . . . . . . . . . . 20c d Other (attach statement-see instructions) . . . . . . . . 200 21 Total credits. Add lines 20a through 20d.. . 22 2019 net 965 tax liability from Form 965-B, Part I, column (d), line 3. See instructions . . . .... 23 Total payments, credits, and section 965 net tax liability. Add lines 19, 21, and 22. Enter here and on page 1, line 33 11 20a 206 22 | 23 Form 1120 (2019) Page 4 For 1120 (2019) Schedule K Other Information (see instructions) 1 Check accounting method: a Cash b Accrual c Other (specify) 2 See the instructions and enter the: a Business activity code no. b Business activity c Product or service 3 is the corporation a subsidiary in an affiliated group or a parent-subsidiary controlled group? If "Yes,"enter name and EIN of the parent corporation . . . . . 4 a b At the end of the tax year: Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or tax-exempt organization own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of the corporation's stock entitled to vote? If "Yes," complete Part 1 of Schedule G (Form 1120) (attach Schedule G). . . . . Did any individual or estate own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of the corporation's stock entitled to vote? If "Yes," complete Part II of Schedule G (Form 1120) (attach Schedule G . At the end of the tax year, did the corporation: Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of stock entitled to vote of any foreign or domestic corporation not included on Form 851, Affiliations Schedule? For rules of constructive ownership, see instructions. If "Yes," complete through (iv) below. in Country of iv) Percentage Name of Corporation Identification Number Incorporation Owned in Voting (if any) 5 a Employer b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If "Yes," complete through (iv) below. ii) Country of M] Maximum Name of Entity Identification Number Organization Percentage Owned in of Capital fif any 6 During this tax year, did the corporation pay dividends (other than stock dividends and distributions in exchange for stock) in excess of the corporation's current and accumulated earnings and profits? See sections 301 and 316 . . . . . . . . If "Yes," file Form 5452, Corporate Report of Nondividend Distributions. See the instructions for Form 5452 If this is a consolidated return, answer here for the parent corporation and on Form 851 for each subsidiary. At any time during the tax year, did one foreign person own, directly or indirectly, at least 25% of the total voting power of all classes of the corporation's stock entitled to vote or at least 25% of the total value of all classes of the corporation's stock? . For rules of attribution, see section 318. If "Yes,"enter: (a) Percentage owned - and (b) Owner's country (c) The corporation may have to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. Enter the number of Forms 5472 attached Check this box if the corporation issued publicly offered debt instruments with original issue discount... . . . If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. Enter the amount of tax-exempt interest received or accrued during the tax year $ Enter the number of shareholders at the end of the tax year (if 100 or fewer) If the corporation has an NOL for the tax year and is electing to forego the carryback period, check here (see instructions) U If the corporation is filing a consolidated return, the statement required by Regulations section 1.1502-21(b)(3) must be attached or the election will not be valid. Enter the available NOL carryover from prior tax years (do not reduce it by any deduction reported on page 1. line 29a.) . . . . . . . . . . . . . . . . . Form 1120 (2019) 8 9 10 11 12 Page 5 Yes No Form 1120 (2019) Schedule K Other Information (continued from page 4) od of the 13 Are the corporation's total receipts (page 1, line 1a, plus lines 4 through 10) for the tax year and its total assets at the end of the tax year less than $250,000? . . . . . . . . . . . . . . . . . . . . . . . . . . . . If "Yes," the corporation is not required to complete Schedules L, M-1, and M-2. Instead, enter the total amount of cash distributions and the book value of property distributions (other than cash) made during the tax year $ 14 is the corporation required to file Schedule UTP (Form 1120), Uncertain Tax Position Statement? See instructions . . . . If "Yes, complete and attach Schedule UTP. 15a Did the corporation make any payments in 2019 that would require it to file Form(s) 1099? . . . . . . . . . . . b f "Yes," did or will the corporation file required Form(s) 1099?. . . . . . . . . 16 During this tax year, did the corporation have an 80%-or-more change in ownership, including a change due to redemption of its own stock? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . During or subsequent to this tax year, but before the filing of this return, did the corporation dispose of more than 65% (by value) of its assets in a taxable, non-taxable, or tax deferred transaction? . . . . . . . . . . . . . 18 Did the corporation receive assets in a section 351 transfer in which any of the transferred assets had a fair market basis or fair market value of more than $1 million? . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 During the corporation's tax year. did the corporation make any payments that would require it to file Forms 1042 and 1042-S under chapter 3 sections 1441 through 1464) or chapter 4 (sections 1471 through 1474) of the Code? . . . . . . . . 20 is the corporation operating on a cooperative basis?. . . . . . . . . . . . . . . . . . . . . . . During the tax year, did the corporation pay or accrue any interest or royalty for which the deduction is not allowed under section 267A? See instructions If "Yes, enter the total amount of the disallowed deductions $ Does the corporation have gross receipts of at least $500 million in any of the 3 preceding tax years? (See sections 59Alex2) and (3). . . . . . If "Yes," complete and attach Form 1991. 23 Did the corporation have an election under section 163() for any real property trade or business or any farming business in effect during the tax year? See instructions .. . . . . 24 Does the corporation satisfy one or more of the following? See instructions. . . . . . . . . . . . . . . . a The corporation owns a pass-through entity with current, or prior year carryover, excess business interest expense. b The corporation's aggregate average annual gross receipts (determined under section 448(c)) for the 3 tax years preceding the current tax year are more than $26 million and the corporation has business interest expense. c The corporation is a tax shelter and the corporation has business interest expense. If "Yes, to any, complete and attach Form 8990. 25 is the corporation attaching Form 8998 to certify as a Qualified Opportunity Fund?.. . . . . . . . . . . . . If "Yes, enter amount from Form 1996, line 14 - . . . $ Form 1120 (2018) Form 1120 (2019) Page 6 Schedule L Balance Sheets per Books Beginning of tax year End of tax year Assets 1 Cash - . . . . . . . . . . . 2a Trade notes and accounts receivable... b Less allowance for bad debts . . . . 3 Inventories . . . . . . . . . . . 4 U.S. government obligations . . . . . 5 Tax-exempt securities (see instructions).. 6 Other current assets (attach statement) . . Loans to shareholders . . . . . . . 8 Mortgage and real estate loans . . . . . 9 Other investments (attach statement) . . 10a Buildings and other depreciable assets . . b Less accumulated depreciation..... 11a Depletable assets. . . . . . . . . b Less accumulated depletion . . . . . . 12 Land (net of any amortization). . . 13a Intangible assets (amortizable only) .. . b Less accumulated amortization . . .. . 14 Other assets (attach statement). .... 15 Total assets . Liabilities and Shareholders' Equity 16 Accounts payable . . . . . . . . . 17 Mortgages, notes, bonds payable in less than 1 year 18 Other current liabilities (attach statement) . 19 Loans from shareholders. .. . .. . 20 Mortgages, notes, bonds pavable in 1 year or more 21 Other abilities attach statement) . . Capital stock: a Preferred stock bCommon stock - . . . T 23 Additional paid-in capital. 24 Retained earnings-Appropriated (attach statement) 25 Retained earnings-Unappropriated . . . I T 26 Adjustments to shareholders' equity attach statement 27 Less cost of treasury stock . . . . . . 28 Total liabilities and shareholders' equity . Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return Note: The corporation may be required to file Schedule M-3. See instructions. 1 Net income loss) per books. Income recorded on books this year 2 Federal income tax per books... not included on this return (itemize): 3 Excess of capital losses over capital gains . Tax-exempt interest $ 4 Income subject to tax not recorded on books this year [itemize): Deductions on this retum not charged against book income this year (itemize): 5 Expenses recorded on books this year not deducted on this return (itemize): a Depreciation - S a Depreciation . . b Charitable contributions S b Charitable contributions. $ c Travel and entertainment. $ 9 Add lines 7 and 8. . . . 6 Add lines 1 through 5. . . . . 10 Income (page 1, line 28) - line 6 less line 9 Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L) 1 Balance at beginning of year . . 5 .. Distributions: a Cash . . . . . 2 b Stock Net income (loss) per books . . . . . . . . . . 3 Other increases (itemize): Property. . . . 6 Other decreases (itemize 7 Add lines 5 and 6. .. . . . 4 Add lines 1, 2, and 3. . . . . . 8 Balance at end of year (line 4 less line 7) Form 1120 (2018)
