CORPORATE TAX RETURN PROBLEM THREE M INC. SPRING 2021
2019 FORM 1120
Anita Mann, Marsha Mellow, and Tequila Mockingbird each own one-third of the common stock of Three M Inc. (TMI). TMI was incorporated on February 1, 2010. It has only one class of stock outstanding and operates as a C corporation since its inception. TMI caters all types of social events throughout east Texas.
The following is TMIs book income statement for 2019:
TMI
Income Statement
For Year Ending December 31, 2019
Revenue from sales $1,800,000
Sales returns and allowances (5,000)
Cost of goods sold (350,000)
Gross profit from operations 1,445,000
Dividend income 25,000
Interest income 10,000
Capital gain (loss) (15,000)
Total income $1,465,000
Expenses:
Compensation 950,000
Bad debt expenses 15,000
Business meals 3,000
Maintenance 6,000
Property taxes 11,000
State income taxes 45,000
Payroll taxes 44,000
Rent 70,000
Interest 5,000
Advertising 52,000
Professional services 16,000
Employee pension plan 32,000
Supplies 5,000
Other expenses 27,000
Federal income tax expense 60,000
Total expenses 1,341,000
Net income $ 124,000
The following are TMIs book balance sheets as of December 31, 2018 and December 31, 2019:
TMI
Balance Sheets
December 31, 2018 and December 31, 2019
12/31/2018 12/31/2019
Assets:
Cash $270,000 $305,000
Accounts receivable 560,000 580,000
Allowance for doubtful accounts (60,000) (50,000)
Inventory 140,000 150,000
U.S. government bonds 20,000 20,000
State and local bonds 120,000 120,000
Investments in stocks 400,000 360,000
Equipment 140,000 140,000
Accumulated depreciation (140,000) (140,000)
Other assets 20,000 21,000
Total assets $1,470,000 $1,506,00
WIUNI LULU ID 8 Anita Mann, Marsha Mellow, and Tequila Mockingbird each own one-third of the common stock of Three M Inc. (TMI). TMI was incorporated on February 1, 2010. It has only one class of stock outstanding and operates as a C corporation since its inception. TMI eaters all types of social events throughout east Texas The following is TMI's book income statement for 2019: TMI Income Statement For Year Ending December 31, 2019 Revende from sales Sales returns and allowances Cost of goods sold Gross profit from operations Dividend income Interest income Capital gain (loss) Total income $1,800,000 (5,000) (350,000) 1.445,000 25.000 10,000 (15.000 $1.465,000 4 Experises: Compensation Bad debt expenses Business meals Maintenance Property taxes State income taxes Payroll taxes Rent Interest Advertising Professional services Employee pension plan 950,000 15,000 3,000 6,000 11.000 45,000 44,000 70.000 5,000 52.000 16,000 32,000 5 $ 534 3/12 UST Webmail - Goo File Explorer WC Corp Tax Return P- to search ID 83 Advertising Professional services Employee pension plan Supplies Other expenses Federal income tax expertise Total expenses Net income $2.000 16,000 32.000 5.000 27,000 60.000 1341.000 S 124,000 I The following are TMI's book balance sheets as of December 31, 2018 and December 31, 2019 TMI Balance Sheets December 31, 2018 and December 31, 2019 S0+ TE 12/31/2018 12/31/2019 Assets Cash $270.000 $105.000 D D e 539 PM 1/12/2021 1 File Explorer JUST Webmal - Goo WC Corp Tax Return ere to search - AA2 ID U-AX . ID 83 Balance Sheets December 31, 2018 and December 31, 2019 013 12/31/2018 12/31/2019 Assets Cash Accounts receivable Allowance for doubtful accounts Inventory U.S government bonds State and local boods Investments in stocks Equipment Accumulated depreciation Other assets Total assets $270,000 560.000 (60,000) 140,000 20,000 120.000 400,000 140.000 (140.000) 20.000 $1.470.000 $305.000 580.000 (50,000) 150,000 20,000 120.000 360,000 140.000 (140,000) 21.000 $1.506,000 Liabilities and Shareholders' Equity Accounts payable 280,000 Other current liabilities 20.000 Other liabilities 40,000 Common stock 400.000 Retained earnings 730,000 Total liabilities and shareholders' equity $1.470.000 238,000 18,000 26.000 400.000 824.000 $1.506,000 Other Information: s ca 4 E 1. TMI is located at 3400 Montrose Blvd, Suite 1900, Houston, TX 77006, 2. TMI's employer identification number is 76-1234567 3. TMI's business activity is catering food and services. Its business activity code is 722300 4. The three shareholders also work as officers for the corporation. Anita Mann is the clef executive officer and president (social security number (SSN) 462-10-2222). Marsha Mellow is the executive vice president and chief operating officer (SSN 164-14-3333) Tequila Mockingbird is the vice president of finance (SSN 469-18-4444), she is the 1000 5:40 PM 31/12/20 UST Webmail Goo File Explore Corp Tax Return P pe here to search ID == 1 82 ha 1. TMI is located at 3400 Montrose Blvd, Suite 1900, Houston, TX 77006. 2. TMI's employer identification number is 76-1234567. 3. TMI's business activity is catering food and services. Its business activity code is 722300 4. The three shareholders also work as officers for the corporation. Anita Mann is the chief executive officer and president (social security number (SSN) 462-10-2222). Marsha Mellow is the executive vice president and chief operating officer (SSN 464-14-3333). Tequila Mockingbird is the vice president of finance (SSN 469-18-4444), she is the corporate officer who will be signing the return. 5. All officers devote 100% of their time to the business and they are all U.S. citizens. 6. TMI uses the accrual method of accounting and has a calendar year-end. 7. TMI made four equal estimated tax payments of $15.000 each on 4/15/19, 6/15/19,9/15/19, and 12/15/19. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, TMI would like to receive a refund but they are not interested in applying for a quick refund. TMI also does not want to e-file the retum. 5 8. TMI paid a dividend of $10,000 to each of its three shareholders on November 1. TMI had ample earnings and profits (E&P) to absorb the distribution. 9. TMI's inventory-related purchases during 2019 were $360,000. It values its inventory based on cost using the FIFO inventory cost flow method. Assume the rules of Section 263A do not apply to TMI 10. Of the $10,000 interest income, $3,000 was from a Vidor, TX bond that was used to find public activities (issued in 2013), $1,000 was from a U.S. Treasury bond, and the remaining $6,000 was from IBC Bank money market account. 101 27 D 0 78 et 4 81 8 XV, U., w MMI. IMI received a Form 1099-B showing proceeds and stock basis. 13. TMI's compensation is as follows: Anita $150,000: Marsha $140,000; Tequila $130,000 Others $530,000 14. TMI wrote-off $25,000 in accounts receivable as uncollectible during the year. 15. At January 1, 2019, TMI's equipment was fully depreciated for both book and tax purposes 16. The $5,000 interest expense was from a business loan 17. Other expenses include $6,000 for premiums on term life insurance policies for which TMI is the beneficiary. The policies cover the lives of Anita, Marsha, and Tequila 18. TMI is not a qualified personal service corporation or a personal holding company 19. TMI has filed all required Forms 1099 for the year Required: Complete Three M Inc.'s 2019 Form 1120, including Forins 1125-A, 1125-E, Schedules D. G, and Line Explanations, using the information provided above, Print the federal official return" only, excluding client documents (error report, override and estimate report, tax summaries, filing checklist) but including all required forms, schedules, and line explanations. You will tum in this print-out on the due date of this assignment --- see course syllabus for due date. The print-out should be approximately 14 pages If any information is missing, make reasouable assumptions to fill in the gaps. Check Figures: 1. Page 1, line 11. Total Income = $1,477,000 2. Page 1, line 27. Total Deductions = $1,283,500 3. Page 1, line 30. Taxable income - $181.000 4. Page 1. line 36, Refunded -$21.990 5. Page 5, Line 15, Total Assets 12/31/19 $1,506,000 6. Page 5. M-1, Line 6 = $206,500 7. Page 5, M-1, Line 9 = $13,000 8. Page 5, M-2, Line 8 = $824,000 N 5:40 PM UST Webmal - GO search File Explorer SC Corp Tax Return P WIUNI LULU ID 8 Anita Mann, Marsha Mellow, and Tequila Mockingbird each own one-third of the common stock of Three M Inc. (TMI). TMI was incorporated on February 1, 2010. It has only one class of stock outstanding and operates as a C corporation since its inception. TMI eaters all types of social events throughout east Texas The following is TMI's book income statement for 2019: TMI Income Statement For Year Ending December 31, 2019 Revende from sales Sales returns and allowances Cost of goods sold Gross profit from operations Dividend income Interest income Capital gain (loss) Total income $1,800,000 (5,000) (350,000) 1.445,000 25.000 10,000 (15.000 $1.465,000 4 Experises: Compensation Bad debt expenses Business meals Maintenance Property taxes State income taxes Payroll taxes Rent Interest Advertising Professional services Employee pension plan 950,000 15,000 3,000 6,000 11.000 45,000 44,000 70.000 5,000 52.000 16,000 32,000 5 $ 534 3/12 UST Webmail - Goo File Explorer WC Corp Tax Return P- to search ID 83 Advertising Professional services Employee pension plan Supplies Other expenses Federal income tax expertise Total expenses Net income $2.000 16,000 32.000 5.000 27,000 60.000 1341.000 S 124,000 I The following are TMI's book balance sheets as of December 31, 2018 and December 31, 2019 TMI Balance Sheets December 31, 2018 and December 31, 2019 S0+ TE 12/31/2018 12/31/2019 Assets Cash $270.000 $105.000 D D e 539 PM 1/12/2021 1 File Explorer JUST Webmal - Goo WC Corp Tax Return ere to search - AA2 ID U-AX . ID 83 Balance Sheets December 31, 2018 and December 31, 2019 013 12/31/2018 12/31/2019 Assets Cash Accounts receivable Allowance for doubtful accounts Inventory U.S government bonds State and local boods Investments in stocks Equipment Accumulated depreciation Other assets Total assets $270,000 560.000 (60,000) 140,000 20,000 120.000 400,000 140.000 (140.000) 20.000 $1.470.000 $305.000 580.000 (50,000) 150,000 20,000 120.000 360,000 140.000 (140,000) 21.000 $1.506,000 Liabilities and Shareholders' Equity Accounts payable 280,000 Other current liabilities 20.000 Other liabilities 40,000 Common stock 400.000 Retained earnings 730,000 Total liabilities and shareholders' equity $1.470.000 238,000 18,000 26.000 400.000 824.000 $1.506,000 Other Information: s ca 4 E 1. TMI is located at 3400 Montrose Blvd, Suite 1900, Houston, TX 77006, 2. TMI's employer identification number is 76-1234567 3. TMI's business activity is catering food and services. Its business activity code is 722300 4. The three shareholders also work as officers for the corporation. Anita Mann is the clef executive officer and president (social security number (SSN) 462-10-2222). Marsha Mellow is the executive vice president and chief operating officer (SSN 164-14-3333) Tequila Mockingbird is the vice president of finance (SSN 469-18-4444), she is the 1000 5:40 PM 31/12/20 UST Webmail Goo File Explore Corp Tax Return P pe here to search ID == 1 82 ha 1. TMI is located at 3400 Montrose Blvd, Suite 1900, Houston, TX 77006. 2. TMI's employer identification number is 76-1234567. 3. TMI's business activity is catering food and services. Its business activity code is 722300 4. The three shareholders also work as officers for the corporation. Anita Mann is the chief executive officer and president (social security number (SSN) 462-10-2222). Marsha Mellow is the executive vice president and chief operating officer (SSN 464-14-3333). Tequila Mockingbird is the vice president of finance (SSN 469-18-4444), she is the corporate officer who will be signing the return. 5. All officers devote 100% of their time to the business and they are all U.S. citizens. 6. TMI uses the accrual method of accounting and has a calendar year-end. 7. TMI made four equal estimated tax payments of $15.000 each on 4/15/19, 6/15/19,9/15/19, and 12/15/19. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, TMI would like to receive a refund but they are not interested in applying for a quick refund. TMI also does not want to e-file the retum. 5 8. TMI paid a dividend of $10,000 to each of its three shareholders on November 1. TMI had ample earnings and profits (E&P) to absorb the distribution. 9. TMI's inventory-related purchases during 2019 were $360,000. It values its inventory based on cost using the FIFO inventory cost flow method. Assume the rules of Section 263A do not apply to TMI 10. Of the $10,000 interest income, $3,000 was from a Vidor, TX bond that was used to find public activities (issued in 2013), $1,000 was from a U.S. Treasury bond, and the remaining $6,000 was from IBC Bank money market account. 101 27 D 0 78 et 4 81 8 XV, U., w MMI. IMI received a Form 1099-B showing proceeds and stock basis. 13. TMI's compensation is as follows: Anita $150,000: Marsha $140,000; Tequila $130,000 Others $530,000 14. TMI wrote-off $25,000 in accounts receivable as uncollectible during the year. 15. At January 1, 2019, TMI's equipment was fully depreciated for both book and tax purposes 16. The $5,000 interest expense was from a business loan 17. Other expenses include $6,000 for premiums on term life insurance policies for which TMI is the beneficiary. The policies cover the lives of Anita, Marsha, and Tequila 18. TMI is not a qualified personal service corporation or a personal holding company 19. TMI has filed all required Forms 1099 for the year Required: Complete Three M Inc.'s 2019 Form 1120, including Forins 1125-A, 1125-E, Schedules D. G, and Line Explanations, using the information provided above, Print the federal official return" only, excluding client documents (error report, override and estimate report, tax summaries, filing checklist) but including all required forms, schedules, and line explanations. You will tum in this print-out on the due date of this assignment --- see course syllabus for due date. The print-out should be approximately 14 pages If any information is missing, make reasouable assumptions to fill in the gaps. Check Figures: 1. Page 1, line 11. Total Income = $1,477,000 2. Page 1, line 27. Total Deductions = $1,283,500 3. Page 1, line 30. Taxable income - $181.000 4. Page 1. line 36, Refunded -$21.990 5. Page 5, Line 15, Total Assets 12/31/19 $1,506,000 6. Page 5. M-1, Line 6 = $206,500 7. Page 5, M-1, Line 9 = $13,000 8. Page 5, M-2, Line 8 = $824,000 N 5:40 PM UST Webmal - GO search File Explorer SC Corp Tax Return P
