Tax Return Problem

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, 2013 and business began on June 1, 2013. 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 the 2014 Form 4562 ? Depreciation and Amortization. You do not need to complete Parts I, II, and V of the form because you should assume there is no Section 179 deduction, bonus depreciation, or listed property for the 2014 tax year. You will compute MACRS depreciation in Parts III and IV and amortization in Part VI. You will also need to complete Page 1 of the 2014 Form 1120 ? U.S. Corporation Income Tax Return. You will only need to complete through line 31. These forms are found on the IRS website (www.irs.gov). Also, complete the Modified Schedule M-1 Reconciliation of Income (Loss) per Books with Income per Return uploaded on Moodle instead of the Schedule M-1 on page 5 of the Form 1120.

Note that the depreciation and amortization amounts computed on Form 4562 flow to Form 1120 page 1. The Form 1120 page 1 is the tax income statement that includes all tax amounts for income and deductions. The Modfied Schedule M-1 starts with net income per books and adjusts the book revenues and expenses to tax amounts using book-tax differences. Line 28 of the Form 1120 should tie to line 8 on the Schedule M-1. Use the appendix in your textbook to compute the total corporate tax on line 31 of the Form 1120. Do not worry about including any non-numerical information that is not provided with the assignment.

The company owns the following assets:

Land purchased on 5/1/2013 for $180,000. The land was placed in service on 6/1/2013.

Building purchased on 5/1/2013 for $350,000. The building was placed in service on 6/1/2013.

Screen printing machinery purchased and placed in service on 6/1/2013 for $85,000.

Office equipment purchased and placed in service on 1/1/2014 for $90,000

Additional screen printing machinery purchased and placed in service on 2/1/2014 for $425,000

Computer equipment purchased and placed in service on 3/1/2014 for $35,000

Patent purchased and placed in service on 7/1/2014 for $21,000. The patent was purchased from another business and has a remaining legal life of 7 years. For book purposes, the patent is amortized using the straight line method over 7 years.

Warehouse purchased and placed in service on 9/1/2014 for $300,000

Back the Pack uses straight line depreciation for book purposes. Book depreciation expense is $95,600 in 2014.

In addition to depreciation expense, you had the following book income and expenses in 2014:

Income from t-shirt sales of $1,150,000. Related cost of goods sold of $200,000Muni bond interest income of $12,000Salaries and wages of $250,000A fine paid to the City of Raleigh of $6,000Advertising costs of $7,000Meals and entertainment expenses of $14,000 Increases in the Allowance for Bad Debts account equaled $13,000 and specific account write-offs totaled $15,000$6,000 in 2013. Two-quarters of the consulting services related to this payment were performed in 2013, one-quarter were performed in 2014, and the remainder will be performed in 2015.$10,000 in 2014. One-fifth of the consulting services related to this payment were performed in 2014. The remaining services will be performed in 2015.

Back the Pack incurred the following expenses in 2013, which may be relevant to the 2014 return. These costs were expensed for book purposes in 2013.

• Organizational costs of $8,000 Start-up costs of $7,000

Tax Return Problem 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, 2013 and business began on June 1, 2013. 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 the 2014 Form 4562 - Depreciation and Amortization. You do not need to complete Parts I, II, and V of the form because you should assume there is no Section 179 deduction, bonus depreciation, or listed property for the 2014 tax year. You will compute MACRS depreciation in Parts III and IV and amortization in Part VI. You will also need to complete Page 1 of the 2014 Form 1120 - U.S. Corporation Income Tax Return. You will only need to complete through line 31. These forms are found on the IRS website (www.irs.gov). Also, complete the Modified Schedule M-1 Reconciliation of Income (Loss) per Books with Income per Return uploaded on Moodle instead of the Schedule M-1 on page 5 of the Form 1120. Note that the depreciation and amortization amounts computed on Form 4562 flow to Form 1120 page 1. The Form 1120 page 1 is the tax income statement that includes all tax amounts for income and deductions. The Modfied Schedule M-1 starts with net income per books and adjusts the book revenues and expenses to tax amounts using book-tax differences. Line 28 of the Form 1120 should tie to line 8 on the Schedule M-1. Use the appendix in your textbook to compute the total corporate tax on line 31 of the Form 1120. Do not worry about including any non-numerical information that is not provided with the assignment. The company owns the following assets: Land purchased on 5/1/2013 for $180,000. The land was placed in service on 6/1/2013. Building purchased on 5/1/2013 for $350,000. The building was placed in service on 6/1/2013. Screen printing machinery purchased and placed in service on 6/1/2013 for $85,000. Office equipment purchased and placed in service on 1/1/2014 for $90,000 Additional screen printing machinery purchased and placed in service on 2/1/2014 for $425,000 Computer equipment purchased and placed in service on 3/1/2014 for $35,000 Patent purchased and placed in service on 7/1/2014 for $21,000. The patent was purchased from another business and has a remaining legal life of 7 years. For book purposes, the patent is amortized using the straight line method over 7 years. Warehouse purchased and placed in service on 9/1/2014 for $300,000 Back the Pack uses straight line depreciation for book purposes. Book depreciation expense is $95,600 in 2014. In addition to depreciation expense, you had the following book income and expenses in 2014: Income from t-shirt sales of $1,150,000. Related cost of goods sold of $200,000 Muni bond interest income of $12,000 Salaries and wages of $250,000 A fine paid to the City of Raleigh of $6,000 Advertising costs of $7,000 Meals and entertainment expenses of $14,000 Increases in the Allowance for Bad Debts account equaled $13,000 and specific account write-offs totaled $15,000 Back the Pack received payments for consulting services in 2013 and 2014 as follows: $6,000 in 2013. Two-quarters of the consulting services related to this payment were performed in 2013, one-quarter were performed in 2014, and the remainder will be performed in 2015. $10,000 in 2014. One-fifth of the consulting services related to this payment were performed in 2014. The remaining services will be performed in 2015. Back the Pack incurred the following expenses in 2013, which may be relevant to the 2014 return. These costs were expensed for book purposes in 2013. Organizational costs of $8,000 Start-up costs of $7,000