Prepare Schedules M-1 and K-1 (for Blake Turin only) for tax year 2019. See attached set of facts and blank tax forms. Please download the tax forms, prepare them manually, then scan and submit the tax forms (and calculations as in the YL, Inc. example) in PDF format. Do not use tax software. Be sure to include all names, addresses, check all the appropriate boxes, etc. If needed, refer to the tax form instructions available at the IRS website in the Tax Research Materials folder.
Hints: There are five book-tax differences. Taxable income (Schedule M-1, line 8) is $134,950. Ordinary income is $142,150.
Information:
Tax Form:
SCHEDULE M-1 AND SCHEDULE K-1 TAX YEAR 2019 INCOME: GROSS RECEIPTS COST OF GOODS SOLD QUALIFIED DIVIDEND INCOME TAX-EXEMPT INTEREST INCOME TOTAL INCOME 855,000 (551,000) 7,500 4,000 315,500 EXPENSES: BOOK DEPRECIATION SALARIES AND WAGES EXPENSE POLITICAL CONTRIBUTIONS EXPENSE RENT EXPENSE STATE AND LOCAL TAXES CHARITABLE CONTRIBUTIONS INTEREST EXPENSE BUSINESS INSURANCE EXPENSE MEALS EXPENSE SUPPLIES EXPENSE TELEPHONE EXPENSE UTILITIES EXPENSE OFFICE EXPENSE TOTAL EXPENSES 12,800 100,000 2,000 12,000 3,700 6,500 6,700 4,600 4,500 3,100 4,100 3,400 6,200 169,600 NET INCOME PER BOOKS 145,900 OTHER INFORMATION: NEWPORT NEWS, INC. P.O. BOX 120 RUMFORD, RI 02916 EIN 23-6392101 BLAKE TURIN 60% OWNER 1700 ADDISON DRIVE PROVIDENCE, RI 02903 SSN 088-76-6301 TAX DEPRECIATION TOTAL SECTION 179 INCLUDED IN TAX DEPRECIATION 10,300 8,200 TOTAL CASH DISTRIBUTIONS (ALLOCATED ACCORDING TO OWNERSHIP %). 60,000 ADVANCE REVENUE RECEIVED IN 2018, TAXABLE IN 2018. EARNED AND INCLUDED IN BOOK INCOME IN 2019. 13,700 IGNORE THE QUALIFIED BUSINESS INCOME INFORMATION THAT WOULD BE REPORTED IN BOX 17, CODE V. Page 5 Form 1120-S (2019) Schedule M-1 Reconciliation of Income (Loss) per Books With Income (Loss) per Return Note: The corporation may be required to file Schedule M-3. See instructions. 1 Net income (loss) per books 5 Income recorded on books this year 2 Income included on Schedule K, lines 1, 2, not included on Schedule K, lines 1 3c, 4, 5a, 6, 7, 8, 9, and 10, not recorded through 10 (itemize): on books this year (itemize) a Tax-exempt interest $ 3 Expenses recorded on books this year not included on Schedule K, lines 1 through 12 and 14p (itemize): a Depreciation $ 6 Deductions included on Schedule K. lines 1 through 12 and 14p, not charged against book income this year (itemize): a Depreciation $ account b Travel and entertainment $ 7 Add lines 5 and 6 8 Income (loss) (Schedule K, line 18). 4 Add lines 1 through 3 Subtract line 7 from line 4 Schedule M-2 Analysis of Accumulated Adjustments Account, Shareholders' Undistributed Taxable income Previously Taxed, Accumulated Earnings and Profits, and Other Adjustments Account (see instructions) (a) Accumulated (b) Shareholders (c) Accumulated (d) Other adjustments adjustments account undistributed taxable earnings and profits income previously taxed 1 Balance at beginning of tax year 2 Ordinary income from page 1, line 21 Other additions 4 Loss from page 1, line 21 5 Other reductions 6 Combine lines 1 through 5 7 Distributions Balance at end of tax year. Subtract line 7 from line 6 Form 1120-S (2019) 3 8 SCHEDULE M-1 AND SCHEDULE K-1 TAX YEAR 2019 INCOME: GROSS RECEIPTS COST OF GOODS SOLD QUALIFIED DIVIDEND INCOME TAX-EXEMPT INTEREST INCOME TOTAL INCOME 855,000 (551,000) 7,500 4,000 315,500 EXPENSES: BOOK DEPRECIATION SALARIES AND WAGES EXPENSE POLITICAL CONTRIBUTIONS EXPENSE RENT EXPENSE STATE AND LOCAL TAXES CHARITABLE CONTRIBUTIONS INTEREST EXPENSE BUSINESS INSURANCE EXPENSE MEALS EXPENSE SUPPLIES EXPENSE TELEPHONE EXPENSE UTILITIES EXPENSE OFFICE EXPENSE TOTAL EXPENSES 12,800 100,000 2,000 12,000 3,700 6,500 6,700 4,600 4,500 3,100 4,100 3,400 6,200 169,600 NET INCOME PER BOOKS 145,900 OTHER INFORMATION: NEWPORT NEWS, INC. P.O. BOX 120 RUMFORD, RI 02916 EIN 23-6392101 BLAKE TURIN 60% OWNER 1700 ADDISON DRIVE PROVIDENCE, RI 02903 SSN 088-76-6301 TAX DEPRECIATION TOTAL SECTION 179 INCLUDED IN TAX DEPRECIATION 10,300 8,200 TOTAL CASH DISTRIBUTIONS (ALLOCATED ACCORDING TO OWNERSHIP %). 60,000 ADVANCE REVENUE RECEIVED IN 2018, TAXABLE IN 2018. EARNED AND INCLUDED IN BOOK INCOME IN 2019. 13,700 IGNORE THE QUALIFIED BUSINESS INCOME INFORMATION THAT WOULD BE REPORTED IN BOX 17, CODE V. Page 5 Form 1120-S (2019) Schedule M-1 Reconciliation of Income (Loss) per Books With Income (Loss) per Return Note: The corporation may be required to file Schedule M-3. See instructions. 1 Net income (loss) per books 5 Income recorded on books this year 2 Income included on Schedule K, lines 1, 2, not included on Schedule K, lines 1 3c, 4, 5a, 6, 7, 8, 9, and 10, not recorded through 10 (itemize): on books this year (itemize) a Tax-exempt interest $ 3 Expenses recorded on books this year not included on Schedule K, lines 1 through 12 and 14p (itemize): a Depreciation $ 6 Deductions included on Schedule K. lines 1 through 12 and 14p, not charged against book income this year (itemize): a Depreciation $ account b Travel and entertainment $ 7 Add lines 5 and 6 8 Income (loss) (Schedule K, line 18). 4 Add lines 1 through 3 Subtract line 7 from line 4 Schedule M-2 Analysis of Accumulated Adjustments Account, Shareholders' Undistributed Taxable income Previously Taxed, Accumulated Earnings and Profits, and Other Adjustments Account (see instructions) (a) Accumulated (b) Shareholders (c) Accumulated (d) Other adjustments adjustments account undistributed taxable earnings and profits income previously taxed 1 Balance at beginning of tax year 2 Ordinary income from page 1, line 21 Other additions 4 Loss from page 1, line 21 5 Other reductions 6 Combine lines 1 through 5 7 Distributions Balance at end of tax year. Subtract line 7 from line 6 Form 1120-S (2019) 3 8
