! Required information Problem 22-52 (LO 22-3) (Algo) [The following information applies to the questions displayed below.) Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In year 1, Julio and Milania each received distributions of $12,000 from Falcons Corporation Falcons Corporation (an 5 Corporation) Income Statement December 31, Year 1 and Year 2 Sales revenue Cost of goods sold Salary to owners Julio and Milania Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income Government fines Overall net income Distributions Year 1 $ 320,000 (41,000) (40,000) (30,000) (17,000) (30,000) 12,000 1,800 Year 2 $ 450,000 (64,000) (80,000) (60,000) (34,000) (50,000) 22,500 4,600 (3,000) $ 186,100 $ 50,000 $ 175,800 $ 24,000 Problem 22-52 Part a (Algo) a. What amount of ordinary income and separately stated items are allocated to them for year 1 based on the information above? Assume that Falcons Corporation has $220,000 of qualified property (unadjusted basis). Amount Allocated to Allocated to Julio Milania Ordinary Income Schedule Schedule K for Form 1120-s. Page 3 Form 1120-S (2020) Schedule K Total amount 3a 3b 3c 4 5a Income (Loss) 50 6 8a 8b 8c 9 10 11 12a Deductions (2) Amount Shareholders' Pro Rata Share items 1 Ordinary business income (loss) (page 1. line 21) | 2 Net rental real estate income loss) (attach Form 9825) 3a Other gross rental income (loss) 6 Expenses from other rental activities (attach statement) c Other net rental income (loss). Subtractine 36 from line 3a 4 Interest income 5 Dividends: a Ordinary dividends b Qualified dividends 6 Royalties 7 Net short-term capital gain (loss) (attach Schedule D (Form 1120-)) 8a Net long-term capital gain (loss) (attach Schedule D (Form 1120-S)) b Collectibles (28%) gain (loss) c Unrecaptured section 1250 gain (attach statement) 9 Net section 1231 gain (loss) (attach Form 4797) 10 Other income (loss) (see instructions) Type 11 Section 179 deduction (attach Form 4562) 12a Charitable contributions b Investment interest expense c Section 59(e)(2) expenditures (1) Type d Other deductions see instructions) Type 13a Low-income housing credit (Section 4205)) b Low-income housing credit (other) c Qualified rehabilitation expenditures (rental real estate) (attach Form 3468. if applicable) d Other rental real estate credits (see instructions) Type e Other rental credits (see instructions) Type f Biofuel producer credit (attach Form 8478) g Other credits (see instructions) Type 14a Name of country or U.S. possession b Gross income from all sources c Gross income sourced at shareholder level |- Foreign gross income sourced at corporate level d Reserved for future use e Foreign branch category | f Passive category g General category h Other (attach statement) -Deductions allocated and apportioned at shareholder level i Interest expense Other |- Deductions allocated and apportioned at corporate level to foreign source income k Reserved for future use i Foreign branch category m Passive category n General category o Other attach statement) 12b 120(2) 120 13a 13b 13c 130 13e 13f 139 Credits 14b 14c 14d 14e 14f 149 14h Foreign Transactions 14 14 14k 141 14m 14n 140 140 14p 149 15a 156 15c Alternative Minimum Tax (AMT) Items o Other (attach statement) - Other information p Total foreign taxes (check one): Paid Accrued 9 Reduction in taxes available for credit (attach statement) Other foreign tax information (attach statement) 15a Post-1988 depreciation adjustment b Adjusted gain or loss c Depletion (other than oil and gas) d Oil, gas, and geothermal properties-gross income e Oil, gas, and geothermal propertiesdeductions f Other AMT items (attach statement) 16a Tax-exempt interest income b Other tax-exempt income c Nondeductible expenses d Distributions (attach statement if required) (see instructions) e Repayment of loans from shareholders 17a Investment income b Investment expenses c Dividend distributions paid from accumulated earnings and profits d Other items and amounts (attach statement) 18 Income (los) reconciliation. Combine the amounts on lines 1 through 10 in the far right column. From the result, subtract the sum of the amounts on lines 11 through 120 and 14p Items Affecting Shareholder Basis 15d 15e 15f 16a 16b 16c 160 16e 17a 17b 17c Other Information Reconciliation 18 Form 1120-S2020) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education. cComplete Julio's 1120-s. Schedule K-1. for year 1. Employer Identification Number: Falcons Corporation EIN: 58-1111111 5 Corporation EIN: 59-2222222 Shareholder's identifying number: 111-11-1111 Prepare Form 1120-s. Schedule K1 Schedule K-1 for Form 1120-s. 2020 Schedule K-1 (Form 1120-5) Department of the Treasury Internal Revenue Service Final K 1 Amended K-1 OMB No. 1545-0123 Part III Shareholder's Share of Current Year Income Deductions, Credits, and Other Items 1 Ordinary business income (loss) 13 Credits For calendar year 2020, ar tax year beginning ending .20 2020 2 Net rental real estate income (loss) Shareholder's Share of Income, Deductions, Credits, etc. See back of form and separate instructions. 3 Other net rental income (loss) 14 Foreign transactions 4 Interest income Part I Information About the Corporation A Corporation's employer identification number Sa Ordinary dividends B Corporation's name, address, city, Slate, and ZIP code 50 Qualified dividends 6 Royalties CIRS Center where corporation filed retum Net short-term capital gain floss 8a Net long term capital gain (los) Part II Information About the Shareholder D Shareholder's identifying number ab Collectibles (28%)gain (loss) 15 Alternative minimum lax (AMT) items E Shareholder's name, address, city, state, and ZIP code 8c Unrecaptured section 1250 gain 9 Net section 1231 gain floss) 8a Net long-term capital gain (less) Part II Information About the Shareholder D Shareholder's identifying number 8b Collectibles (20%)gain (loss) 15 Alternative minimum tax (AMT) itens E Shareholder's name, address, city, state, and ZIP code 8c Unrecaptured section 1250 gain 9 Net section 1231 gain lass) 10 Other income (los) 16 Items affecting shareholder basis F Current year allocation percentage 4 1 D G Shareholder's number of shares Beginning of tax year End of tax year 11 H Loans from shareholder 12 other deductions Beginning of tax year 5 End of tax year 5 17 Other information y STMT For IRS US Only 18 19 More than one activity for at-risk purposes More than one activity for passive activity purpose *See attached statement for additional information. For Paperwork Reduction Act Notice, see Instructions for Forn 1065. www.irs.gov/Form1065 Cat. No. 11394R Schedule K-1. (Form 1085) 2020 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM IT SELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. O 2021 McGraw-Hill Education. ! Required information Problem 22-52 (LO 22-3) (Algo) [The following information applies to the questions displayed below.) Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In year 1, Julio and Milania each received distributions of $12,000 from Falcons Corporation Falcons Corporation (an 5 Corporation) Income Statement December 31, Year 1 and Year 2 Sales revenue Cost of goods sold Salary to owners Julio and Milania Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income Government fines Overall net income Distributions Year 1 $ 320,000 (41,000) (40,000) (30,000) (17,000) (30,000) 12,000 1,800 Year 2 $ 450,000 (64,000) (80,000) (60,000) (34,000) (50,000) 22,500 4,600 (3,000) $ 186,100 $ 50,000 $ 175,800 $ 24,000 Problem 22-52 Part a (Algo) a. What amount of ordinary income and separately stated items are allocated to them for year 1 based on the information above? Assume that Falcons Corporation has $220,000 of qualified property (unadjusted basis). Amount Allocated to Allocated to Julio Milania Ordinary Income Schedule Schedule K for Form 1120-s. Page 3 Form 1120-S (2020) Schedule K Total amount 3a 3b 3c 4 5a Income (Loss) 50 6 8a 8b 8c 9 10 11 12a Deductions (2) Amount Shareholders' Pro Rata Share items 1 Ordinary business income (loss) (page 1. line 21) | 2 Net rental real estate income loss) (attach Form 9825) 3a Other gross rental income (loss) 6 Expenses from other rental activities (attach statement) c Other net rental income (loss). Subtractine 36 from line 3a 4 Interest income 5 Dividends: a Ordinary dividends b Qualified dividends 6 Royalties 7 Net short-term capital gain (loss) (attach Schedule D (Form 1120-)) 8a Net long-term capital gain (loss) (attach Schedule D (Form 1120-S)) b Collectibles (28%) gain (loss) c Unrecaptured section 1250 gain (attach statement) 9 Net section 1231 gain (loss) (attach Form 4797) 10 Other income (loss) (see instructions) Type 11 Section 179 deduction (attach Form 4562) 12a Charitable contributions b Investment interest expense c Section 59(e)(2) expenditures (1) Type d Other deductions see instructions) Type 13a Low-income housing credit (Section 4205)) b Low-income housing credit (other) c Qualified rehabilitation expenditures (rental real estate) (attach Form 3468. if applicable) d Other rental real estate credits (see instructions) Type e Other rental credits (see instructions) Type f Biofuel producer credit (attach Form 8478) g Other credits (see instructions) Type 14a Name of country or U.S. possession b Gross income from all sources c Gross income sourced at shareholder level |- Foreign gross income sourced at corporate level d Reserved for future use e Foreign branch category | f Passive category g General category h Other (attach statement) -Deductions allocated and apportioned at shareholder level i Interest expense Other |- Deductions allocated and apportioned at corporate level to foreign source income k Reserved for future use i Foreign branch category m Passive category n General category o Other attach statement) 12b 120(2) 120 13a 13b 13c 130 13e 13f 139 Credits 14b 14c 14d 14e 14f 149 14h Foreign Transactions 14 14 14k 141 14m 14n 140 140 14p 149 15a 156 15c Alternative Minimum Tax (AMT) Items o Other (attach statement) - Other information p Total foreign taxes (check one): Paid Accrued 9 Reduction in taxes available for credit (attach statement) Other foreign tax information (attach statement) 15a Post-1988 depreciation adjustment b Adjusted gain or loss c Depletion (other than oil and gas) d Oil, gas, and geothermal properties-gross income e Oil, gas, and geothermal propertiesdeductions f Other AMT items (attach statement) 16a Tax-exempt interest income b Other tax-exempt income c Nondeductible expenses d Distributions (attach statement if required) (see instructions) e Repayment of loans from shareholders 17a Investment income b Investment expenses c Dividend distributions paid from accumulated earnings and profits d Other items and amounts (attach statement) 18 Income (los) reconciliation. Combine the amounts on lines 1 through 10 in the far right column. From the result, subtract the sum of the amounts on lines 11 through 120 and 14p Items Affecting Shareholder Basis 15d 15e 15f 16a 16b 16c 160 16e 17a 17b 17c Other Information Reconciliation 18 Form 1120-S2020) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education. cComplete Julio's 1120-s. Schedule K-1. for year 1. Employer Identification Number: Falcons Corporation EIN: 58-1111111 5 Corporation EIN: 59-2222222 Shareholder's identifying number: 111-11-1111 Prepare Form 1120-s. Schedule K1 Schedule K-1 for Form 1120-s. 2020 Schedule K-1 (Form 1120-5) Department of the Treasury Internal Revenue Service Final K 1 Amended K-1 OMB No. 1545-0123 Part III Shareholder's Share of Current Year Income Deductions, Credits, and Other Items 1 Ordinary business income (loss) 13 Credits For calendar year 2020, ar tax year beginning ending .20 2020 2 Net rental real estate income (loss) Shareholder's Share of Income, Deductions, Credits, etc. See back of form and separate instructions. 3 Other net rental income (loss) 14 Foreign transactions 4 Interest income Part I Information About the Corporation A Corporation's employer identification number Sa Ordinary dividends B Corporation's name, address, city, Slate, and ZIP code 50 Qualified dividends 6 Royalties CIRS Center where corporation filed retum Net short-term capital gain floss 8a Net long term capital gain (los) Part II Information About the Shareholder D Shareholder's identifying number ab Collectibles (28%)gain (loss) 15 Alternative minimum lax (AMT) items E Shareholder's name, address, city, state, and ZIP code 8c Unrecaptured section 1250 gain 9 Net section 1231 gain floss) 8a Net long-term capital gain (less) Part II Information About the Shareholder D Shareholder's identifying number 8b Collectibles (20%)gain (loss) 15 Alternative minimum tax (AMT) itens E Shareholder's name, address, city, state, and ZIP code 8c Unrecaptured section 1250 gain 9 Net section 1231 gain lass) 10 Other income (los) 16 Items affecting shareholder basis F Current year allocation percentage 4 1 D G Shareholder's number of shares Beginning of tax year End of tax year 11 H Loans from shareholder 12 other deductions Beginning of tax year 5 End of tax year 5 17 Other information y STMT For IRS US Only 18 19 More than one activity for at-risk purposes More than one activity for passive activity purpose *See attached statement for additional information. For Paperwork Reduction Act Notice, see Instructions for Forn 1065. www.irs.gov/Form1065 Cat. No. 11394R Schedule K-1. (Form 1085) 2020 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM IT SELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. O 2021 McGraw-Hill Education