Your final submission should include Form 1120 and supporting Schedules (B, C, L, M-1, and M-2, as required), in addition to Schedule D and Schedule G. If you prepare your solution using software, your solution will include Forms 4562, 4797, 1125-A, and 1125-E, but these are NOT required to be submitted. Alvin's Music Inc. (AMI) was formed in 2012 by Alvin Jones and Theona Smith. Alvin and Theona officially incorporated their store on June 12, 2013. AMI sells (retail) all kinds of music- related products including musical instruments, sheet music, CDs, and DVDs. Alvin owns 60 percent of the outstanding common stock of AMI and Theona owns the remaining 40 percent. AMI is located at 355 Music Way, East Palo Alto, California 94303. AMI's Employer Identification Number is 29-5748859. . . AMI's business activity is retail sales of music-related products. Its business activity code is 451140. Officers of the corporation are as follows: o Alvin is the chief executive officer and president (Social Security number 123-45- 6789). o Theona is the executive vice president (Social Security number 978-65-4321). o Gwen Givens is the vice president over operations o Carlson Bannister is the secretary All officers devote 100 percent of their time to the business and all officers are U.S. citizens. Neither Gwen nor Carlson owns any stock in AMI. . AMI uses the accrual method of accounting and has a calendar year-end. AMI made payments that require Form 1099s, and will file the Form 1099s before the tax return is filed. AMI made four equal estimated tax payments of $43,000 each. Its tax liability last year was $175,000. If it has overpaid its federal tax liability, AMI would like to receive a refund. AMI paid a dividend of $80,000 to its shareholders on December 1. AMI had sufficient earnings and profits (E&P) to cover the distribution.The following is AMI's audited income statement for 2023: AMI Income Statement For year ending December 31, 2023 Revenue from sales $ 3,420,000 Sales returns and allowances (40,000) Cost of goods sold (834,000) Gross profit from operations $ 2,546,000 Other income: Capital gains $ 8,000 Gain from disposition of fixed assets 2,000 Dividend income 12,000 Interest income 15,000 Gross income $2,583,000 Expenses: Compensation $(1,300,000) Depreciation (20,000) Bad debt expense (15,000) Meals (5,000) Maintenance (7,000) Charitable donations (27,000) Property taxes (45,000) State income taxes (60,000) Other taxes (56,000) Interest (62,000) Advertising (44,000) Professional services (32,000) Pension expense (40,000) Supplies (6,000) Other expenses (38.000) Total expenses (1,757,000) Income before taxes 826,000 Federal income tax expense (260,000) Net income after taxes $ 566,000 Notes: 10. 11 AMI has a capital loss carryover to this year from last year in the amount of $5,000. AMTI's inventory-related purchases during the year were $1,134,000. AMI values its inventory based on cost using the FIFO inventory cost flow method. Assume the rules of 263A do not apply to AMI. . Of the $15,000 interest income, $2,500 was from a City of Fremont bond issued in 2020, $3,500 was from a Pleasanton city bond issued in 2021, $3,000 was from a U.S. Treasury bond, and the remaining $6,000 was from a money market account. AMI sold equipment for $10,000. It originally purchased the equipment for $12,000 and, through the date of the sale, had recorded a cumulative total of $4,000 of book depreciation on the asset and a cumulative total of $6,000 of tax depreciation. For tax purposes, the entire gain was recaptured as ordinary income under 1245. AMTI's dividend income came from Simon's Sheet Music. AMI owned 15,000 shares of the stock in Simon's Sheet Music (SSM) at the beginning of the year. This represented 15 percent of the SSM outstanding stock. On July 22, 2023, AMI sold 2,500 shares of its Simon's Sheet Music stock for $33,000. It had originally purchased these shares on April 24, 2016, for $25,000. After the sale, AMI owned 12.5 percent of Simon's Sheet Music. AMI's compensation is as follows: Officers, $600,000 e Other, $700,000 AMI wrote off $10,000 in accounts receivable as uncollectible during the year. Tax depreciation was $31,000. None of the depreciation should be claimed on Form 1125A. Of the $62,000 of interest expense, $56,000 was from the mortgage on AMI's building and the remaining $6,000 of interest was from business-related loans. . The pension expense is the same for both book and tax purposes. 12, Other expenses include $3,000 for premiums paid on term life insurance policies for which AMI is the beneficiary. The policies cover the lives of Alvin and Theona. The following are AMI's audited balance sheets as of December 31, 2022 and December 31, 2023. AMI, Inc. Balance Sheet as of December 31, 2023 Assets Cash $ 240,000 $ 169,000 Accounts receivable 600,000 700,000 Allowance for doubtful accounts (35,000) (40,000) Inventory 1,400,000 1,700,000 U.S. government bonds 50,000 50,000 State and local bonds 140,000 140,000 Investments in stock 300,000 275,000 Building and other depreciable assets 1,500,000 1,600,000 Accumulated depreciation (200,000) (216,000) Land 900,000 900,000 Other assets 250,000 270,000 Total assets $5,145,000 $5,548,000 Liabilities and Shareholders' Equity Accounts payable $ 250,000 $ 220,000 Other current liabilities 125,000 120,000 Mortgage 800,000 790,000 Other liabilities 200,000 162,000 Capital stock 600,000 600,000 Retained earnings 3,170,000 3.656.000 Total liabilities and shareholders' equity =~ $5,145,000 $5,548,000 .1120 U.S. Corporation Income Tax Return OMB No. 1545-0123 For calendar year 2023 or tax year beginning , 2023, ending , 20 Department of the Treasury Go to www.irs.gov/Form1120 for instructions and the latest information. 2023 Internal Revenue Service A Check if: Name B Employer identification number a Consolidated return (attach Form 851) TYPE b Lifeonlife consoli- Number, street, and room or suite no. If a P.O. box, see instructions. C Date incorporated dated return . OR 2 Personal holding co. PRINT (attach Sch. PH) . City or town, state or province, country, and ZIP or foreign postal code Total assets (see instructions) 3 Personal service corp. (see instructions) . Schedule M-3 attached E Check if: (1) Initial return (2) Final return (3) Name change ) Address change Gross receipts or sales 1a b Returns and allowances . 1h c Balance. Subtract line 1b from line 1a . N Cost of goods sold (attach Form 1125-A) . Gross profit. Subtract line 2 from line 1c Dividends and inclusions (Schedule C, line 23) Income Interest Gross rents Gross royalties Capital gain net income (attach Schedule D (Form 1120)) Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797) Other income (see instructions- attach statement) . 10 Total income. Add lines 3 through 10. 11 Compensation of officers (see instructions-attach Form 1125-E) 12 Salaries and wages (less employment credits) 13 Repairs and maintenance 14 Bad debts . 15 Rents 16 Taxes and licenses 17 Interest (see instructions) 18 Charitable contributions . 19 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) . 20 Deductions (See instructions for limitations on deductions.) Depletion . 21 Advertising 22 Pension, profit-sharing, etc., plans 23 Employee benefit programs 24 Energy efficient commercial buildings deduction (attach Form 7205) . 25 Other deductions (attach statement) 26 Total deductions. Add lines 12 through 26 27 Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11. 28 29a Net operating loss deduction (see instructions) 29a Special deductions (Schedule C, line 24) . 29b C Add lines 29a and 29b 29c 30 Taxable income. Subtract line 29c from line 28. See instructions 30 31 Total tax (Schedule J, Part I, line 11) . 31 32 Reserved for future use . 32 33 Total payments and credits (Schedule J, Part II, line 23) 33 Tax, Refundable Credits, and Payments 34 Estimated tax penalty. See instructions. Check if Form 2220 is attached 34 35 Amount owed. If line 33 is smaller than the total of lines 31 and 34, enter amount owed 35 36 Overpayment. If line 33 is larger than the total of lines 31 and 34, enter amount overpaid 36 3 Enter amount from line 36 you want: Credited to 2024 estimated tax Refunded 37 Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and Sign complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. May the IRS discuss this return Here with the preparer shown below? See instructions. Yes No Signature of officer Date Title Preparer's signature Date PTIN Paid Print/Type preparer's name Check if Preparer self-employed Use Only Firm's name Firm's EIN Firm's address Phone no. For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11450Q Form 1120 (2023