John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111120), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303. Premiums S election was made on January 15, 2012, its date of incorporation. The following information was taken from the companys 2020 income statement.

*MY QUESTIONS is on form 1120s examples online shows on schedule M-1 Box 3 the line under Travel and Entertainment $15,000- where does that number come from?

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 Parsons and Smith)		(150,000)
Repairs		(206,106)
Depreciation expense, tax and book		(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

A comparative balance sheet appears below.

Premiums accounting firm provides the following additional information.

Distributions to shareholders	$100,000
Beginning balance, Accumulated adjustments account	111,148
Ordinary business income for QBI	639,574
W2 wages for QBI	795,205

Prepare Premiums Form 1120S and Schedule K1s for John Parsons and George Smith, 5607 20th Street, Cut and Shoot, TX 77303. Suggested software: ProConnect Tax.

MY QUESTION: WHERE DOES the $15,000 from the problem above come from? I already added Payroll penalties under non-deductible expenses on Schedule K line 16c. The tax form is for year 2020.

Scheame h-2 Analysis of Accumulated Adjustments Account, Shareholders' Undistributed Taxable Income Previously Taxed. Accumulated Farninas and Profits. and Other Adiustments Account Scheame h-2 Analysis of Accumulated Adjustments Account, Shareholders' Undistributed Taxable Income Previously Taxed. Accumulated Farninas and Profits. and Other Adiustments Account