FACTS

Valerie Lawson and Clara Norman are the sole equal shareholders in the corporation of Lawson And Norman Enterprises, Inc. each owning one hundred (100) shares of common stock of the corporation.The corporation, which is a retail office supplies and stationery store, began its operations on January 2, 1985 (also date of incorporation).For Federal Income Tax purposes, the corporation is a calendar year taxpayer, uses the Accrual Method Of Accounting and, since its year of inception, properly elected and maintained the S Corporation status.Its Employer Identification Number is 76-1234567, address is 4369 Robbie Lane Houston, Texas 77026-3915, telephone number is (281) 479-8132, fax number is (281) 536-1908 and E-Mail address is "lawsonandnormanenterprises.com".The business activity code for the corporation is 453210.Valerie Lawson, who is the designated Tax Matters Person for the corporation, has social security number of 234-56-7890, her address is 8124 Annette Court Houston, Texas 77031-9475and her telephone number is (832) 246-8015.Clara Norman has social security number of 890-12-3456, her address is 2716 Nanette Drive Houston, Texas 77061-3459 and her telephone number is (832) 623-5097.

FINANCIAL INFORMATION

During the year of 2016, the Lawson And Norman Enterprises, Inc. reported the following Income and Expenses (including necessary accruals) for Financial Accounting purposes:

Gross Receipts $1,482,000

Sales Returns And Allowances 109,000

Purchases 510,000

Dividends Received From Stock (Not Qualified Dividends)

Investments In Less Than twenty percent (20%)

Owned United States (U. S.) Corporation 80,000

Interest Income:

Taxable Interest (Bank) 18,000

Tax-Exempt Interest 7,200

Salaries:Valerie Lawson 75,000

Clara Norman 75,000

Other Employees 108,000

Repairs And Maintenance 19,300

Rent Expense - Office 84,000

Rent Expense - Equipment 15,500

Payroll Taxes (Federal And State) 19,600

Interest Expense (Trade Or Business Interest) 25,200

Advertising Expense 44,500

Charitable Contributions ("50%" Charities)48,000

Legal And Professional Fees 28,800

Depreciation Expense 50,000 *

Utilities Expense 27,300

Employee's Health Insurance Premiums 14,200

Entertainment Of Clients 5,000

Officers' Life Insurance Premiums 14,400 **

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* - Based upon Straight-Line Depreciation, a useful life of five (5) years and no salvage value for allassets (see specific assets below).

** - Lawson And Norman Enterprises, Inc. Is The Designated Beneficiary.

No additional capital contributions were made during the year of 2016 and each shareholder made a total of $140,000 (all cash) withdrawals throughout the course of the year of 2016.

The Lawson And Norman Enterprises, Inc. owns the following depreciable assets:

ASSET DESCRIPTION DATE ACQUIRED ORIGINAL COST

Automobile 2015 Lexus 460 April 1, 2015 $ 50,000

(Five-year Property)

Automobile 2015 Cadillac Seville April 1, 2015 50,000

(Five-year Property)

Furniture And FixturesMay 1, 2014 150,000

(Seven-year Property)

Each automobile was used a total of 18,000 miles during the year of 2016 all which were business miles.The automobiles were not available for personal use during off-duty hours and were used solely by Valerie Lawson and Clara Norman, who both have another vehicle available for personal use. For Federal Income Tax purposes, all of these assets are depreciated using the Modified Accelerated Cost Recovery System (MACRS).Section 179 Deduction was not elected in regards to any of these assets nor was Straight-Line Depreciation used.

BALANCE SHEETS

The Balance Sheets (Financial Accounting) for the Lawson And Norman Enterprises, Inc. at the beginning and ending of the year of 2016 are as follows:

ASSETS January 1 December 31

Cash $36,000 $84,000

Trade Notes And Accounts Receivable 96,00090,000

Inventory(Valued At Cost) * 120,000 100,000

Marketable Securities - Long Term 140,000 250,000

Depreciable Assets (And Land) 260,000 ** 260,000 **

Less: Accumulated Depreciation (65,000) (115,000)

Other Assets (Deposits) 12,000 12,000

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TOTAL ASSETS $ 599,000 $ 681,000

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LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts Payable (Non Recourse) $96,000 $ 116,200

Notes Payable - Short Term (Recourse) 24,600 24,000

Notes Payable - Long Term (Recourse) 164,000212,000

Capital Stock 10,000 10,000

Retained Earnings (Unappropriated) 304,400 ***318,800

TOTAL LIABILITIES AND ------------ ------------

SHAREHOLDERS' EQUITY $ 599,000 $ 681,000

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*- The rules of Section 263A of the Internal Revenue Code do not apply to the corporation.

**- Includes $10,000 allocated to Land.

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*** - The beginning Retained Earnings (Unappropriated) balance was allocated to tax accounts ofLawson And Norman Enterprises, Inc. as follows:

Accumulated Adjustments Account $286,800

Other Adjustments Account 17,600

OTHER INFORMATION

Both shareholders are United States citizens and the corporation does not own directly or indirectly fifty percent (50%) or more of the voting stock in any other domestic corporation. In addition, Lawson And Norman Enterprises, Inc. was not a member of a controlled group that is subject to the provisions of Section 1561 of the Internal Revenue Code.During the year of 2016, the corporation had no interest in or a signature or other authority over any financial account in a foreign country.Furthermore, the corporation did not receive a distribution from, nor was the grantor of, or transferor to, a foreign trust during the year of 2016.The corporation has not filed nor is required to file Form 8264 - Application For Registration Of A Tax Shelter and the corporation did not issue publicly offered debt instruments with original issue discount.Finally, no estimated tax payments were made during the tax year of 2016 by the corporation for itself or on behalf of any of the shareholders of the corporation.

REQUIRED

Prepare the S Corporation Tax Return for the Lawson And Norman Enterprises, Inc. for the year of 2016 and Schedule K-1 for both shareholders.The following Forms are needed to complete the Tax Return:

Form 1120S

Form 1125-A

Form 1125-E

Schedule K-1 (Form 1120S) (2)

Form 4562

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CHECK FIGURESFORM 1120SINCOME (Page 1)

1.Total Income (Loss) (Line 6): $843,000.

DEDUCTIONS (Page 1)

1.Depreciation (Line 14): $36,437.(Also Line 22 Form 4562)

2.Total Deductions (Line 20): $575,337.

3.Ordinary Income (Loss) (Line 21): $267,663.

SCHEDULE K (Page 2 - Page 3)

1.Interest Income (Line 4): $18,000.

2.Ordinary Dividends (Line 5a): $80,000.

3.Charitable Contributions (Line 12a): $48,000.

4Total Property Distributions (Including Cash) Other Than Dividends (Line 16d): $280,000.

5.Income (Loss) (Line 18): $317,663.

SCHEDULE M-1 (Page 4)

1.Net Income (Loss) Per Books (Line 1): $294,400.

2.Expenses Recorded On Books This Year

Not Included On Schedule K (Itemize) (Line 3): $30,463.

SCHEDULE M-2 (Page 4)

1.Balance At End Of Year (Line 8):

(a) Accumulated Adjustments Account: $308,400.

(b) Other Adjustments Account: $10,400.

SCHEDULE K-1 (Each) (Page 1)

1.Ordinary Income (Loss) From Trade Or Business (Line 1): $133,831.

2.Interest Income (Line 4): $9,000.

3.Ordinary Dividends (Line 5a): $40,000.

4.Charitable Contributions (Line 12): $24,000.