John Globe (123-45-6781) and George Star (123-45-6782) are 50% and 50% owners, respectively of Scully, Inc. (11-1111120), a Baseball manufacturing company located at 2400 Nutwood Fullerton, CA 92625. Scully’s S- election was made effective January 1, 2018. Prior to that Scully was a C Corporation incorporated on 6/15/1980.
On 12/31/2020, the Company sold interest in the Land used in the trade or business for $902,000 Cash. The basis of the land was $2,000 purchased on 1/1/2017. No estimated tax payments have been made.
The following information was taken from the company’s 2020 income statement without regard to the sale to the sale of Land:
Interest income $ 100,000
Gross sales receipts 2,410,000
Beginning inventory 9,607
Direct labor (203,102)
Direct materials purchased (278,143)
Direct other costs (249,356)
Ending inventory 3,467
Salaries and wages (442,103)
Officers’ salaries ($75,000 each to Globe and Star) (150,000)
Repairs (206,106)
Depreciation expense, tax and book (assume Section 179) (15,254)
Interest expense (35,222)
Rent expense (operating) (40,000)
Taxes (65,101)
Charitable contributions (cash) (20,000)
Advertising expenses (20,000)
Payroll penalties (15,000)
Other deductions (59,899)
Book Income 704,574
Net Unrealized Built-In Gain-Land on 12/31/2019 $500,000
Scully’s accounting firm provides the following additional information.
Distributions to shareholders $100,000
Beginning balance, Accumulated adjustments account 111,148
W–2 wages for QBI 795,205
Balance Sheet

1. Using the preceding information, prepare a 2020 Form 1120S and Schedule K–1s for
John Globe 25 Newport Blvd, Tustin CA 92782, and George Star, 10 Main Street, Tustin, CA 92782. Complete the Forms 1125–A, 1125–E, 4562, 4797 and Schedule D and other forms you deem necessary. If any information is missing, make realistic assumptions.
 

12/31/2019 12/31/2020 Cash 47,840 ? Accounts Receivable 93,100 123,104 Inventories 9,607 3,467 Prepaid Expenses Building and Equipment Accumulated Depreciation 8,333 17,582 138,203 185,348 (84,235) Land 2,000 Total Assets 2$ 214,848 1,793,922 Accounts Payable $ 42,500 $ 72,300 Notes Payable-Short Term Notes Payable-Long Term Loan to Fenway 4,500 2,100 26,700 24,300 50,000 Federal Taxes Payable ? Capital Stock Retained Earnings 30,000 30,000 111,148 Total Liabilities and Equity $ 214,848 $ 1,793,922