You own a t-shirt screen printing company called Harness the Hurd. Harness the Hurd operates as a regular Corporation under Subchapter C of the Internal Revenue Code. Harness the Hurd incorporated on April 1, 2018 and opened for business on June 1, 2018. The company has been profitable in all previous years and has no NOL carryforward. The tax year for the Corporation is the calendar year, and the company is on the accrual method. The tax identification number for Harness the Hurd is 12345678. The company elects to accelerate compensation accruals and follow the services exception for prepaid income.

Please complete the 2020 Form 4562 Depreciation and Amortization. You do not need to complete Parts I and V of the form because you should assume the company (1) did not elect to take a Section 179 expense during 2020 (or 2018 or 2019) and (2) has never has owned any listed property. You will compute bonus depreciation in Part II on line 14 for the 2020 tax year. Note that you should also assume the company took bonus depreciation in 2018 and 2019 on all qualifying personalty (note that the bonus depreciation percentage from 1/1/2012 through 9/27/2017 is 50% and from 9/28/2017 through 12/31/2022 is 100%). Compute MACRS depreciation in Part III and include the total in Part IV on line 22. Compute amortization cost recovery deductions in Part VI.

In addition to the Form 4562, you also need to complete Page 1 of the 2020 Form 1120 U.S. Corporation Income Tax Return. You will only need to complete the form through line 31. Both 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 for 2020 available on Canvas instead of the Schedule M-1 on page 5 of the Form 1120. Please include with the Modified Schedule M-1 a simple Book Income Statement to show your work calculating Net Income.

Recognize 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 Modified 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 Modified Schedule M-1. Do not worry about including any non-numerical information that is not provided with the assignment. The company owns the following assets: Land acquired for $180,000. The land was placed in service on 6/1/2018. Building acquired for $350,000. The building was placed in service on 6/1/2018.

Office equipment purchased and placed in service on 6/1/2018 for $90,000. The office equipment has a MACRS cost recovery period of 7 years.

Screen printing machinery purchased and placed in service on 6/1/2018 for $510,000. The screen printing machinery has a MACRS cost recovery period of 7 years.

Computer equipment purchased and placed in service on 6/1/2018 for $35,000 with a MACRS cost recovery period of 5 years.

Patent purchased and placed in service 7/1/2018 for $21,000. The patent was purchased from another business (in an asset acquisition not part of a business acquisition) and has a remaining legal life of 7 years. For book purposes, the patent is amortized straight-line over 7 years. Warehouse purchased and placed in service on 9/1/2018 for $300,000.

Additional screen-printing machinery purchased and placed in service on 11/22/2019 for $124,000. The screen printing machinery has a MACRS cost recovery period of 7 years.

Office equipment purchased and placed in service on 4/19/2020 for $159,000 with a MACRS cost recovery period of 7 years.

Harness the Hurd uses straight line depreciation for book purposes. Book depreciation expense totals $145,600 in 2020.

In addition to depreciation expense, the company recognized the following book revenues and expenses in 2020:

• Revenues from t-shirts equaled $1,150,000; related cost of goods sold totaled $200,000
• State and local bond interest income of $12,000
• A fine paid to the City of Logan for $6,000
• Advertising costs of $7,000
• Meal expenses (not from a restaurant) of $14,000
• Increases in the Allowance for Bad Debts account equaled $13,000 and specific account write-offs totaled $15,000
• Salary & Wages Expense of $200,000 accrued and paid in 2020
• Salary & Wages Expense of $20,000 accrued on 12/31/2020 and paid on 1/15/2021
• Employee Bonus of $60,000 accrued on 12/31/2020 with $10,000 paid on the 10^th of each month from January through June

Harness the Hurd received payments for consulting services as follows:

• $6,000 in 2018. Two-quarters of the consulting services related to this payment were performed in 2018, one-quarter was performed in 2019, and the remainder will be performed in 2020.

• $10,000 in 2019. One-fifth of the consulting services related to this payment were performed in 2019. Three-fifths will be performed in 2020 and one-fifth will be performed in 2021.

Harness the Hurd incurred the following expenses in 2018 which may be relevant to the 2020 tax return. All of these costs were expensed for book purposes in 2018.

• Organizational costs of $8,000

Start-up costs of $7,000