Tax Return Problem 1 You own a t-shirt screen printing company called Back the Pack. Back the Pack operates as a regular Corporation under Subchapter C of the Internal Revenue Code. Back the Pack incorporated on April 1, 2012 and business began on June 1, 2012. The company owns the building that the store is located in and all of the equipment that the business uses. The tax year for the Corporation is the calendar year and it is on the accrual method. The tax identification number for Back the Pack is 12345678. Please complete Page 1 of the 2013 Form 1120 U.S. Corporation Income Tax Return. You will only need to complete through Line 31. Also complete the attached Modified Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return. These forms and their instructions are found on the IRS website (www.irs.gov). You will also need to complete the 2013 Form 4562 Depreciation and Amortization, which can be found on the IRS website. Assume the company didn't take a section 179 deduction or any other bonus depreciation deductions during 2012. You will not need to complete Part I, II, V of the form because there is no 179 deduction, bonus depreciation, or listed property for the 2013 tax year. You will compute MACRS depreciation in Parts III and IV and amortization in Part VI. The company owns the following assets: Land purchased on 5/1/2012 for $180,000. The land was placed in service on 6/1/2012. Building purchased on 5/1/2012 for $350,000. The building was placed in service on 6/1/2012. Screen printing machinery purchased 6/1/2012 for $100,000. Office equipment purchased 1/1/2013 for $75,000 Additional screen printing machinery purchased 2/1/2013 for $425,000 Computer equipment purchased 3/1/2013 for $30,000 Patent purchased 7/1/2013 for $22,000. The patent was purchased from another business and has a remaining legal life of 6 years. For book purposes, the patent is amortized using the straight line method over 6 years. Warehouse purchased 9/1/2013 for $300,000 Back the Pack uses straight line depreciation for book purposes. Book depreciation expense is $485,000 in 2013. In addition to depreciation expense, you had the following book income and expenses in 2013: Income from t-shirt sales of $1,025,000. Related cost of goods sold of $200,000 Muni bond interest income of $12,000 Salaries and wages of $150,000 A fine paid to the City of Raleigh of $6,000 Advertising costs of $7,000 Meals and entertainment expenses of $11,000 Increases in the Allowance for Bad Debts account equaled $13,000 and specific account write-offs totaled $8,000 Back the Pack received payments for consulting services in 2012 and 2013 as follows: $10,000 in 2012. Two quarters of the consulting services related to this payment were performed in 2012, one quarter were performed in 2013, and the remainder will be performed in 2014. $6,000 in 2013. One third of the consulting services related to this payment were performed in 2013. The remaining services will be performed in 2014. Back the Pack incurred the following expenses in 2012, which may be relevant to the 2013 return. These costs were expensed for book purposes in 2012. Organizational costs of $10,000 Start-up costs of $6,000