C Corporation Tax Return

Country is USA

C Corporation Tax Return Banner, Inc. (a C corporation) is located at 90 Fifth Avenue, New York City, NY. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of self- protection gear. Its employer identification number (EIN) is 12-12345687. The company was incorporated on January 1, 1941 and began business on April 1, 1941. Banner, Inc. made the following estimated tax payments for 2017: April 15, 2017 June 15, 2017 September 15, 2017 December 15, 2017 Total $100,000 200,000 235,000 235,000 $770,000 Taxable income in 2016 was $1.4 million and the 2016 tax was $476,000. The corporation earned its 2017 taxable income evenly throughout the year. Therefore, it does not use the annualization or seasonal methods. Inventory and Cost of Goods Sold: The corporation uses the periodic inventory method and prices its inventory using the lower of FIFO cost or market. Only beginning inventory, ending inventory, and purchases should be reflected on the appropriate form. No other costs or expenses are allocated to cost of goods sold. The corporation is exempt from the uniform capitalization (UNICAP) rules because average gross income for the previous three years was less than $10 million. The following information should also be included on the applicable form: Line 9 (a) Check (ii) (b), (c), & (d) Not applicable (e) & (6) No Compensation of Officers: Officer Social Security # % of Stock Owned % Time Devoted to Business 100 Diana Banner Peter Bruce Wayne Prince 123-45-6789 987-65-4321 123-98-4567 Amount of Compensation $ 246,500 153,000 153,000 50 25 25 100 100 Bad Debts: For tax purposes, the corporation uses the direct write-off method of deducting bad debts. For book purposes, the corporation uses an allowance for doubtful accounts. During 2017, the corporation charged $34,000 to the allowance account, such amount representing actual write-offs for 2017. Additional information for Schedule K: 1b 2a Accrual 451140 Retail Sales Self-Protection Gear No Do not check box 9 Fill in the correct amount 10 11 Do not check box 12 Not applicable 13-14 No 15a No b Do not check box 16-19 No No b 5a Yes, omit Schedule G No No No 6-7 Capital Gains and Losses: The corporation sold 100 shares of Shield Corp. common stock on October 7, 2017 for $125,000. The corporation acquired the stock on December 15, 2016 for $95,000. The corporation also sold 75 shares of Metro Corp common stock on June 17, 2017 for $110,000. The corporation acquired this stock on September 18, 2015 for $117,000. The corporation has a $10,000 capital loss carryover from 2016. These transactions were not reported to the corporation on Form 1099-B. Fixed Assets and Depreciation: Book: The corporation uses straight-line deprecation over the useful lives of the assets as follows: store building, 50 years; equipment, ten years, and trucks, five years. The corporation takes a half- year's depreciation in the year of acquisition and the year of disposition and assumes no salvage value. The book financial statements reflect these calculations. Tax: All assets are MACRS property as follows: store building, 39-year non-residential real property; equipment, seven-year property; and trucks, five-year property. The corporation acquired the store building for $1 million and placed it in services on January 2, 2014. The corporation acquired two pieces of equipment for $200,000 (Equipment 1) and $400,000 (Equipment 2) and placed them in service on January 2, 2014. The corporation acquired the trucks for $100,000 and placed them in service on July 18, 2015. The trucks are not listed property and are no subject to the limitation on luxury automobiles. The corporation did not make the expensing election under Sec. 179 or take bonus depreciation on any property acquired before 2017. Accumulated depreciation through December 31, 2016 on the properties is as follows: Store building Equipment 1 Equipment 2d Trucks $ 75,890 112,540 225,080 52,000 On October 16, 2017 the corporation sold Equipment 1 for $230,000. The corporation had no Sec. 1231 losses from prior years. In a separate transaction on October 17, 2017 the corporation acquired and placed in service a piece of equipment costing $ 500,000. Assume these transactions do not qualify as like-kind exchange. The new equipment is seven-year property. The corporation made the Sec. 179 expensing election for the entire cost of the property. Use published IRS depreciation tables to compute the 2017 depreciation. The balance sheet is follows: January 1, 2017 Debit Credit December 31, 2017 Debit Credit Account 469,491 $ 340,000 953,648 425,000 17,000 21,250 2,125,000 262,000 30,000 60,000 2,975,000 50,000 30,000 80,000 300,000 1,000,000 300,000 1,000,000 50,000 70,000 600,000 900,000 Cash Accounts Receivable Allowance for doubtful accounts Inventory Investment in corporate stock Investment in municpal bonds Cash surrender value of insurance policy Land Buildings Accumulated Depreciation - Buildings Equipment Accumulated Depreciation - Equipment Trucks Accumulated Depreciation - Trucks Accounts payable Notes payable (short-term) Accrued payroll taxes Accrued state income taxes Accrued federal income taxes Bonds payble (long-term) Net deferred tax liability Capital stock - common Retained earnings -unappropriated Total 150,000 165,000 100,000 100,000 30.000 300,000 700,000 12,648 3,825 2,125 1,400,000 70,893 850,000 1,700,000 5,286,491 50,000 270,000 560.000 15,810 6,375 103,943 900,000 134,719 850,000 3,666,551 6,813,648 $ 5,286,491 $ $ 6,813,648 $ The unaudited GAAP income statement for 2017 is as follows: $ 8,500,000 (212,500) 8,287,500 $ $ 2,125,000 4,675,000 (2,975,000) $ $ (3,825,000) 4,462,500 Sales Returns Net sales Beginning inventory Purchases Ending Inventory Cost of goods sold Gross profit Expenses: Depreciation Repairs Insurance Net premium-Officers' life insurance Officers' compensation Other salaries Utilities Advertising Legal and accounting fees Charitable contributions Payroll taxes Interest Expense Bad debt expense Total expenses Gain on Sale of equipment Interest on municpal bonds Net gain on stock sales Dividend income Net income before income taxes Federal income tax expense State income tax expense Net income 115,000 17,680 46,750 25,500 552,500 340,000 61,200 40,800 42,500 25,500 52,700 178,500 38,750 $ (1,536,880) 90,000 4,250 23,000 10.200 3,053,070 (937,769) (63,750) 2,051,551 $ Other Information: The corporations's tax rate in 2017 was 34%. The corporation's activities do not qualify for the U.S. production activities deduction. Ignore the AMT and accumulated earnings tax. The corporation received dividends from taxable, domestic corporations, the stock of which Banner owns less than 20%. The corporation paid $ 85,000 in cash dividends to its shareholders during the year and charged the payment directly to retained earnings. The state income tax provided earlier is the exact amount of such taxes incurred during the year. The corporation is not entitled to any credits. Ignore the financial statement impact of any underpayment penalties incurred on the tax return. Required: Prepare the 2017 corporate tax return for Banner, Inc. along with any necessary supporting schedules, forms, etc. Prepare both the Schedule M-3 and M-1 but you may omit Schedule B and Form 8916-A. Notes: 1.) The dividends received deduction percentage in 2017 was 70% for less than 20% owned property. 2.) Omit Form 2220 and insert $4,898 penalty on Form 1120, Page 1, Line 33