| Note: This problem is divided into three parts. You will need to complete some of the forms in the other parts in order to determine the amounts to be used on Form 1040. Some of the data information will be reproduced in the other parts for convenience. |
Enter all amounts as positive numbers, except for a "loss". If required, enter a "loss" as a negative number on the tax form. If an amount box does not require an entry or the answer is zero, enter "0". On Schedule SE, when required, round amounts to the nearest dollar. Use the rounded amounts in subsequent computations.
Information regarding Noah's pet store business is reproduced here. Noah's pet store is located at 1415 S. Patterson Blvd, Dayton, OH 45409. The name of the store is "The Arc," and its taxpayer identification number is 95-9876556. Since you handle Noah's bookkeeping, you have printed the income statement from your Quickbooks software, shown in the table below. The Arc did not claim the COVID-related provisions for the employee retention credit or sick and family leave credits but Noah did defer his self-employment taxes related to The Arc. He estimates 77.5 percent of the profits can be allocated to the period March 27, 2020 through December 31, 2020.
| The Arc 95-9876556 Income Statement For the Year Ended December 31, 2020 |
| Revenue: | | | |
| | Gross Sales | | $143,500.00 |
| | Less: Sales Returns and Allowances | | - |
| | Net Sales | | $143,500.00 |
| Cost of Goods Sold: | | |
| | Beginning Inventory | $10,250.00 | |
| | Add: Purchases | 62,150.00 | |
| | | $72,400.00 | |
| | Less: Ending Inventory | 10,000.00 | |
| | Cost of Goods Sold | | 62,400.00 |
| | Gross Profit (Loss) | | $81,100.00 |
| Expenses: | | |
| | Dues and Subscriptions | - | |
| | Estimated Federal Tax Payments | 7,500.00 | |
| | Estimated State Tax Payments | 3,800.00 | |
| | Insurance | 3,950.00 | |
| | Meals and Entertainment | 1,400.00 | |
| | Miscellaneous | - | |
| | Payroll Taxes | 3,830.00 | |
| | Professional Fees | 1,710.00 | |
| | Rent | 8,420.00 | |
| | Travel | 1,230.00 | |
| | Utilities | 1,250.00 | |
| | Vehicle Expenses | - | |
| | Wages | 25,110.00 | |
| | Total Expenses | | 58,200.00 |
| | Net Operating Income | | $22,900.00 |
| |
Detail of The Arc's meals and entertainment:
| $400 | Meals associated with business travel | | 300 | Arc employee holiday party | | 100 | Overtime meals for employees | | 600 | Sports tickets for entertaining large customers | | $1,400 | | |
OMB No. 1545-0074 SCHEDULE D (Form 1040) Capital Gains and Losses 2020 Department of the Treasury Internal Revenue Service (99) Attach to Form 1040, 1040-SR, or 1040-NR. Go to www.irs.gov/Scheduled for instructions and the latest information. Use Form 8949 to list your transactions for lines 1b, 2, 3, 8, 9, and 10. Attachment Sequence No. 12 Name(s) shown on return Noah and Joan Arc Your social security number 434-11-3311 Yes No Did you dispose of any investment(s) in a qualified opportunity fund during the tax year? If "Yes," attach Form 8949 and see its instructions for additional requirements for reporting your gain or loss. Part I Short-Term Capital Gains and Losses-Generally Assets Held One Year or Less (see instructions) See instructions for how to figure the amounts to enter on the lines below. (d) Proceeds (sales price) (e) Cost (or other basis) (9) Adjustments to gain or loss from Form(s) 8949, Part I, line 2, column (9) (h) Gain or (loss) Subtract column (e) from column (d) and combine the result with column (9) This form may be easier to complete if you round off cents to whole dollars. la Totals for all short-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 1b ...................... 1b Totals for all transactions reported on Form(s) 8949 with Box A checked 2 Totals for all transactions reported on Form(s) 8949 with Box B checked 3 Totals for all transactions reported on Form(s) 8949 with Box C checked........ A Short-term nain from Form 6252 and chort-term nain or local from Forms 4604 6701 and QR24 4 4 4 5 Short-term gain from Form 6252 and short-term gain or loss) from Forms 4684, 6781, and 8824 ..... 5 Net short-term gain or loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K-1 6 Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss Carryover Worksheet in the instructions 7 Net short-term capital gain or (loss). Combine lines 1a through 6 in column (h). If you have any long-term capital gains or losses, go to Part II below. Otherwise, go to Part III on the back ........ 7 Part II Long-Term Capital Gains and Losses-Generally Assets Held More Than One Year (see instructions) 6 See instructions for how to figure the amounts to enter on the lines below. (d) Proceeds (sales price) (e) Cost (or other basis) (9) Adjustments to gain or loss from Form(s) 8949, Part II, line 2 column (9) (h) Gain or (loss) Subtract column (e) from column (d) and combine the result with column (9) This form may be easier to complete if you round off cents to whole dollars. 8a Totals for all long-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 8b. 8b Totals for all transactions reported on Form(s) 8949 with Box D checked 9 Totals for all transactions reported on Form(s) 8949 with Box E checked 10 Totals for all transactions reported on Form(s) 8949 with Roy Echecked 11 12 11 Gain from Form 4797, Part 1; long-term gain from Forms 2439 and 6252; and long-term gain or loss) from Forms 4684, 6781, and 8824 .. 12 Net long-term gain or loss) from partnerships, 5 corporations, estates, and trusts from Schedule(s) K-1 13 Capital gain distributions. See the instructions ........ 14 Long-term capital loss carryover. Enter the amount, if any, from line 13 of your Capital Loss Carryover Worksheet in the instructions .. 15 Net long-term capital gain or loss). Combine lines 8a through 14 in column (h). Then, go to Part III on the back 13 14 15 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11338H Schedule D (Form 1040) 2020 Page 2 16 Schedule D (Form 1040) 2020 Noah and Joan Arc 434-11-3311 Part III Summary 16 Combine lines 7 and 15 and enter the result. If line 16 is a gain, enter the amount from line 16 on Form 1040, 1040-SR, or 1040-NR, line 7. Then, go to line 17 below. If line 16 is a loss, skip lines 17 through 20 below. Then, go to line 21. Also be sure to complete line 22. If line 16 is zero, skip lines 17 through 21 below and enter -6- on Form 1040, 1040-SR, or 1040-NR. line 7. Then, go to line 22. 17 Are lines 15 and 16 both gains? = Yes. Go to line 18. No. Skip lines 18 through 21, and go to line 22. 18 If you are required to complete the 28% Rate Gain Worksheet (see instructions), enter the amount, if any, from line 7 of that worksheet 18 19 If you are required to complete the Unrecaptured Section 1250 Gain Worksheet (see instructions), enter the amount, if any, from line 18 of that worksheet. 19 20 Are lines 18 and 19 both zero or blank? = Yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Forms 1040 and 1040-5R, line 16. Don't complete lines 21 and 22 below. No. Complete the Schedule D Tax Worksheet in the instructions. Don't complete lines 21 and 22 below. 21 If line 16 is a loss, enter here and on Form 1040, 1040-SR, or 1040-NR, line 7, the smaller of: 21 The loss on line 16; or ( ($3,000), or if married filing separately, ($1,500) OMB No. 1545-0074 SCHEDULE D (Form 1040) Capital Gains and Losses 2020 Department of the Treasury Internal Revenue Service (99) Attach to Form 1040, 1040-SR, or 1040-NR. Go to www.irs.gov/Scheduled for instructions and the latest information. Use Form 8949 to list your transactions for lines 1b, 2, 3, 8, 9, and 10. Attachment Sequence No. 12 Name(s) shown on return Noah and Joan Arc Your social security number 434-11-3311 Yes No Did you dispose of any investment(s) in a qualified opportunity fund during the tax year? If "Yes," attach Form 8949 and see its instructions for additional requirements for reporting your gain or loss. Part I Short-Term Capital Gains and Losses-Generally Assets Held One Year or Less (see instructions) See instructions for how to figure the amounts to enter on the lines below. (d) Proceeds (sales price) (e) Cost (or other basis) (9) Adjustments to gain or loss from Form(s) 8949, Part I, line 2, column (9) (h) Gain or (loss) Subtract column (e) from column (d) and combine the result with column (9) This form may be easier to complete if you round off cents to whole dollars. la Totals for all short-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 1b ...................... 1b Totals for all transactions reported on Form(s) 8949 with Box A checked 2 Totals for all transactions reported on Form(s) 8949 with Box B checked 3 Totals for all transactions reported on Form(s) 8949 with Box C checked........ A Short-term nain from Form 6252 and chort-term nain or local from Forms 4604 6701 and QR24 4 4 4 5 Short-term gain from Form 6252 and short-term gain or loss) from Forms 4684, 6781, and 8824 ..... 5 Net short-term gain or loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K-1 6 Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss Carryover Worksheet in the instructions 7 Net short-term capital gain or (loss). Combine lines 1a through 6 in column (h). If you have any long-term capital gains or losses, go to Part II below. Otherwise, go to Part III on the back ........ 7 Part II Long-Term Capital Gains and Losses-Generally Assets Held More Than One Year (see instructions) 6 See instructions for how to figure the amounts to enter on the lines below. (d) Proceeds (sales price) (e) Cost (or other basis) (9) Adjustments to gain or loss from Form(s) 8949, Part II, line 2 column (9) (h) Gain or (loss) Subtract column (e) from column (d) and combine the result with column (9) This form may be easier to complete if you round off cents to whole dollars. 8a Totals for all long-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 8b. 8b Totals for all transactions reported on Form(s) 8949 with Box D checked 9 Totals for all transactions reported on Form(s) 8949 with Box E checked 10 Totals for all transactions reported on Form(s) 8949 with Roy Echecked 11 12 11 Gain from Form 4797, Part 1; long-term gain from Forms 2439 and 6252; and long-term gain or loss) from Forms 4684, 6781, and 8824 .. 12 Net long-term gain or loss) from partnerships, 5 corporations, estates, and trusts from Schedule(s) K-1 13 Capital gain distributions. See the instructions ........ 14 Long-term capital loss carryover. Enter the amount, if any, from line 13 of your Capital Loss Carryover Worksheet in the instructions .. 15 Net long-term capital gain or loss). Combine lines 8a through 14 in column (h). Then, go to Part III on the back 13 14 15 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11338H Schedule D (Form 1040) 2020 Page 2 16 Schedule D (Form 1040) 2020 Noah and Joan Arc 434-11-3311 Part III Summary 16 Combine lines 7 and 15 and enter the result. If line 16 is a gain, enter the amount from line 16 on Form 1040, 1040-SR, or 1040-NR, line 7. Then, go to line 17 below. If line 16 is a loss, skip lines 17 through 20 below. Then, go to line 21. Also be sure to complete line 22. If line 16 is zero, skip lines 17 through 21 below and enter -6- on Form 1040, 1040-SR, or 1040-NR. line 7. Then, go to line 22. 17 Are lines 15 and 16 both gains? = Yes. Go to line 18. No. Skip lines 18 through 21, and go to line 22. 18 If you are required to complete the 28% Rate Gain Worksheet (see instructions), enter the amount, if any, from line 7 of that worksheet 18 19 If you are required to complete the Unrecaptured Section 1250 Gain Worksheet (see instructions), enter the amount, if any, from line 18 of that worksheet. 19 20 Are lines 18 and 19 both zero or blank? = Yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Forms 1040 and 1040-5R, line 16. Don't complete lines 21 and 22 below. No. Complete the Schedule D Tax Worksheet in the instructions. Don't complete lines 21 and 22 below. 21 If line 16 is a loss, enter here and on Form 1040, 1040-SR, or 1040-NR, line 7, the smaller of: 21 The loss on line 16; or ( ($3,000), or if married filing separately, ($1,500)
