Please use the information below to complete Form 1120 and Schedule G for Form 1
ID: 2490619 • Letter: P
Question
Please use the information below to complete Form 1120 and Schedule G for Form 1120. Blank forms can be found in the Hands On Assignment page or in Doc Sharing. If you have a tax-software package, please feel free to use the package but be aware that I will not be able to answer specific questions about the software package. GENERAL COMPANY INFORMATION Margaret Brown and Joel Lee each own 50% of Designs Inc., with no other class of stock authorized. On June 6, 2009, they formed to provide design services. Their business activity code is 541400. Designs Inc.’s business address is 2134 Merry Lane, Las Cruces, NM, 08801. The telephone number is (575) 541-1122, and the e-mail address is designsinc@cdi.com. The employer identification number is 11-1111111. Margaret is the president of the company, and Joel is the vice president. Margaret and Joel are the only full-time designers employed by Designs Inc., and they perform all of the design services of the corporation. Margaret’s Social Security number is 123-45-6789, and Joel’s Social Security number is 555-48-9898. Designs Inc. is an accrual method, calendar-year taxpayer. Designs Inc. uses the straight-line method of depreciation for both book and tax purposes. (You are not provided enough detailed data to complete a Form 4562 [depreciation]. Enter the amount of depreciation on line 20 of Form 1120.) The corporation does not maintain any inventory. During the year, the corporation distributed cash dividends of $10,000. The domestic production activities deduction (DPAD) for the year is $947. You are not provided enough detailed data to complete a Form 8903 (domestic production activities deduction). Enter the amount of the DPAD on line 25 of Form 1120. During the year, Designs Inc. made estimated tax payments of $1,500 each quarter to the IRS. Designs Inc. Income Statement Income Design fees $739,000 Interest income (certificates of deposit) 2,700 Total income $741,700 Expenses Salaries—officers Margaret Brown $190,000 Joel Lee 190,000 $380,000 Salaries—clerical 61,000 Taxes Property 26,810 Payroll 23,280 State income 3,140 Other miscellaneous 2,390 55,620 Repairs and maintenance 16,340 Meals and entertainment 9,800 Travel 5,600 Charitable contributions 1,200 Interest expense on business loans 31,100 Advertising 17,650 Rental expense 9,270 Depreciation 35,910 Contributions to pension plans 31,000 Employee benefit programs 21,170 Accounting service 13,790 Dues and subscriptions 5,100 Insurance 17,750 Legal and professional services 11,000 Miscellaneous 4,360 Telephone 3,160 Total expenses (730,820) Net income before taxes $ 10,880 Federal income tax (5,192) Net income per books $ 5,688 Designs Inc. Balance Sheet Assets January 1, 2012 December 31, 2012 Cash $ 35,610 $ 42,580 Accounts receivable 45,100 43,300 Certificates of deposit 134,000 143,000 Depreciable assets 210,922 221,488 Accumulated depreciation (47,520) (83,430) Land 42,000 42,000 Other assets 3,638 2,490 Total assets $ 423,750 $ 411,428 ====== ====== Liabilities and Equity January 1, 2012 December 31, 2012 Accounts payable $ 26,550 $ 27,497 Other current liabilities 15,110 17,853 Mortgages 126,000 114,300 Capital stock 200,000 200,000 Retained earnings 56,090 51,778 Total liabilities and equity $ 423,750 $ 411,428 ====== =======
Completing Form 1120 INSTRUCTIONS Please use the information below to complete Form 1120 and Schedule G for Form 1120. Blank forms can be found in the Hands On Assignment page or in Doc Sharing. If you have a tax-software package, please feel free to use the package but be aware that I will not be able to answer specific questions about the software package. GENERAL COMPANY INFORMATION Margaret Brown and Joel Lee each own 50% of Designs Inc., with no other class of stock authorized. On June 6, 2009, they formed to provide design services. Their business activity code is 541400 Designs Inc.'s business address is 2134 Merry Lane, Las Cruces, NM, 08801 The telephone number is (575) 541-1122, and the e-mail address is designsinc@cdi.com. The employer identification number is 11-1111111. Margaret is the president of the company, and Joel is the vice president. Margaret and Joel are theExplanation / Answer
Ans;
Form 1120
Department of the Treasury
Internal Revenue Service
U.S. Corporation Income Tax Return
For calendar year 2011 or tax year beginning , 2011, ending , 20
See separate instructions.
OMB No. 1545-0123
2011
TYPE
OR
PRINT
Name
Number, street, and room or suite no. If a P.O. box, see instructions.
City or town, state, and ZIP code
A Check if:
1a Consolidated return
(attach Form 851) .
b Life/nonlife consolidated
return . . .
2 Personal holding co.
(attach Sch. PH) . .
3 Personal service corp.
(see instructions) . .
4 Schedule M-3 attached
B Employer identification number
C Date incorporated
D Total assets (see instructions)
$
E Check if: (1) Initial return (2) Final return (3) Name change (4) Address change
Income
1a Merchant card and third-party payments. For 2011, enter -0- . . . . . . 1a
b Gross receipts or sales not reported on line 1a (see instructions) . . . . . 1b
c Total. Add lines 1a and 1b . . . . . . . . . . . . . . . . 1c
d Returns and allowances plus any other adjustments (see instructions) . . . 1d
e Subtract line 1d from line 1c . . . . . . . . . . . . . . . . . . . . . . . 1e
2 Cost of goods sold from Form 1125-A, line 8 (attach Form 1125-A) . . . . . . . . . . . . 2
3 Gross profit. Subtract line 2 from line 1e . . . . . . . . . . . . . . . . . . . . 3
4 Dividends (Schedule C, line 19) . . . . . . . . . . . . . . . . . . . . . . 4
5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6 Gross rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Gross royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8 Capital gain net income (attach Schedule D (Form 1120)) . . . . . . . . . . . . . . . 8
9 Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . . . . . 9
10 Other income (see instructions—attach schedule) . . . . . . . . . . . . . . . . . 10
11 Total income. Add lines 3 through 10 . . . . . . . . . . . . . . . . . . . . . 11
Deductions (See instructions for limitations on deductions.)
12 Compensation of officers from Form 1125-E, line 4 (attach Form 1125-E) . . . . . . . . . . 12
13 Salaries and wages (less employment credits) . . . . . . . . . . . . . . . . . . 13
14 Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . 14
15 Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
16 Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17 Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
19 Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . 19
20 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) . . 20
21 Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
22 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
23 Pension, profit-sharing, etc., plans . . . . . . . . . . . . . . . . . . . . . 23
24 Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . 24
25 Domestic production activities deduction (attach Form 8903) . . . . . . . . . . . . . . 25
26 Other deductions (attach schedule) . . . . . . . . . . . . . . . . . . . . . 26
27 Total deductions. Add lines 12 through 26 . . . . . . . . . . . . . . . . . . . 27
28 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
b Special deductions (Schedule C, line 20) . . . . . . . . . . . . 29b
c Add lines 29a and 29b . . . . . . . . . . . . . . . . . . . . . . . . . 29c
Tax, Refundable Credits, and
Payments
30 Taxable income. Subtract line 29c from line 28 (see instructions) . . . . . . . . . . . . 30
31 Total tax (Schedule J, Part I, line 11) . . . . . . . . . . . . . . . . . . . . . 31
32 Total payments and refundable credits (Schedule J, Part II, line 21) . . . . . . . . . . . . 32
33 Estimated tax penalty (see instructions). Check if Form 2220 is attached . . . . . . . . 33
34 Amount owed. If line 32 is smaller than the total of lines 31 and 33, enter amount owed . . . . . 34
35 Overpayment. If line 32 is larger than the total of lines 31 and 33, enter amount overpaid . . . . . 35
36 Enter amount from line 35 you want: Credited to 2012 estimated tax Refunded 36
Sign
Here
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 complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
Signature of officer Date
Title
May the IRS discuss this return
with the preparer shown below
(see instructions)? Yes No
Paid
Preparer
Use Only
Print/Type preparer’s name Preparer's signature Date
Check if
self-employed
PTIN
Firm’s name Firm's EIN
Firm's address Phone no.
For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11450Q Form 1120 (2011)
Form 1120 (2011) Page 2
Schedule C Dividends and Special Deductions (see instructions) (a) Dividends
received
(b) %
(c) Special deductions
(a) × (b)
1
Dividends from less-than-20%-owned domestic corporations (other than debt-financed
stock) . . . . . . . . . . . . . . . . . . . . . . . .
2
Dividends from 20%-or-more-owned domestic corporations (other than debt-financed
stock) . . . . . . . . . . . . . . . . . . . . . . . .
3 Dividends on debt-financed stock of domestic and foreign corporations . . . . .
4 Dividends on certain preferred stock of less-than-20%-owned public utilities . . .
5 Dividends on certain preferred stock of 20%-or-more-owned public utilities . . . .
6 Dividends from less-than-20%-owned foreign corporations and certain FSCs . . .
7 Dividends from 20%-or-more-owned foreign corporations and certain FSCs . . .
8 Dividends from wholly owned foreign subsidiaries . . . . . . . . . . .
9 Total. Add lines 1 through 8. See instructions for limitation . . . . . . . .
10
Dividends from domestic corporations received by a small business investment
company operating under the Small Business Investment Act of 1958 . . . . .
11 Dividends from affiliated group members . . . . . . . . . . . . . .
12 Dividends from certain FSCs . . . . . . . . . . . . . . . . .
13 Dividends from foreign corporations not included on lines 3, 6, 7, 8, 11, or 12 . . .
14 Income from controlled foreign corporations under subpart F (attach Form(s) 5471) .
15 Foreign dividend gross-up . . . . . . . . . . . . . . . . . .
16 IC-DISC and former DISC dividends not included on lines 1, 2, or 3 . . . . . .
17 Other dividends . . . . . . . . . . . . . . . . . . . . .
18 Deduction for dividends paid on certain preferred stock of public utilities . . . .
19 Total dividends. Add lines 1 through 17. Enter here and on page 1, line 4 . . .
20 Total special deductions. Add lines 9, 10, 11, 12, and 18. Enter here and on page 1, line 29b . . . . . . .
Form 1120 (2011)
Form 1120 (2011) Page 3
Schedule J Tax Computation and Payment (see instructions)
Part I–Tax Computation
1 Check if the corporation is a member of a controlled group (attach Schedule O (Form 1120)) . . . .
2 Income tax. Check if a qualified personal service corporation (see instructions) . . . . . . . . 2
3 Alternative minimum tax (attach Form 4626) . . . . . . . . . . . . . . . . . . . . 3
4 Add lines 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5 a Foreign tax credit (attach Form 1118) . . . . . . . . . . . . . . 5a
b Credit from Form 8834, line 30 (attach Form 8834) . . . . . . . . . . 5b
c General business credit (attach Form 3800) . . . . . . . . . . . . 5c
d Credit for prior year minimum tax (attach Form 8827) . . . . . . . . . 5d
e Bond credits from Form 8912 . . . . . . . . . . . . . . . . 5e
6 Total credits. Add lines 5a through 5e . . . . . . . . . . . . . . . . . . . . . 6
7 Subtract line 6 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . 7
8 Personal holding company tax (attach Schedule PH (Form 1120)) . . . . . . . . . . . . . . 8
9 a Recapture of investment credit (attach Form 4255) . . . . . . . . . . 9a
b Recapture of low-income housing credit (attach Form 8611) . . . . . . . 9b
c Interest due under the look-back method—completed long-term contracts (attach
Form 8697) . . . . . . . . . . . . . . . . . . . . . . 9c
d Interest due under the look-back method—income forecast method (attach Form
8866) . . . . . . . . . . . . . . . . . . . . . . . 9d
e Alternative tax on qualifying shipping activities (attach Form 8902) . . . . . 9e
f Other (see instructions—attach schedule) . . . . . . . . . . . . . 9f
10 Total. Add lines 9a through 9f . . . . . . . . . . . . . . . . . . . . . . . . 10
11 Total tax. Add lines 7, 8, and 10. Enter here and on page 1, line 31 . . . . . . . . . . . . . 11
Part II–Payments and Refundable Credits
12 2010 overpayment credited to 2011 . . . . . . . . . . . . . . . . . . . . . . 12
13 2011 estimated tax payments . . . . . . . . . . . . . . . . . . . . . . . . 13
14 2011 refund applied for on Form 4466 . . . . . . . . . . . . . . . . . . . . . . 14 ( )
15 Combine lines 12, 13, and 14 . . . . . . . . . . . . . . . . . . . . . . . . 15
16 Tax deposited with Form 7004 . . . . . . . . . . . . . . . . . . . . . . . . 16
17 Withholding (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . 17
18 Total payments. Add lines 15, 16, and 17 . . . . . . . . . . . . . . . . . . . . . 18
19 Refundable credits from:
a Form 2439 . . . . . . . . . . . . . . . . . . . . . . 19a
b Form 4136 . . . . . . . . . . . . . . . . . . . . . . 19b
c Form 3800, line 17c and Form 8827, line 8c . . . . . . . . . . . . 19c
d Other (attach schedule—see instructions) . . . . . . . . . . . . . 19d
20 Total credits. Add lines 19a through 19d . . . . . . . . . . . . . . . . . . . . . 20
21 Total payments and credits. Add lines 18 and 20. Enter here and on page 1, line 32 . . . . . . . . 21
Schedule K Other Information (see instructions)
1 Check accounting method: a Cash b Accrual c Other (specify) Yes No
2 See the instructions and enter the:
a Business activity code no.
b Business activity
c Product or service
3 Is the corporation a subsidiary in an affiliated group or a parent-subsidiary controlled group? . . . . . . . . . .
If “Yes,” enter name and EIN of the parent corporation
4 At the end of the tax year:
a Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or tax-exempt
organization own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of the
corporation’s stock entitled to vote? If "Yes," complete Part I of Schedule G (Form 1120) (attach Schedule G) . . . . . .
b Did any individual or estate own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all
classes of the corporation’s stock entitled to vote? If "Yes," complete Part II of Schedule G (Form 1120) (attach Schedule G) .
Form 1120 (2011)
Form 1120 (2011) Page 4
Schedule K Other Information continued (see instructions)
Yes No
5 At the end of the tax year, did the corporation:
a
Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of stock entitled to vote of
any foreign or domestic corporation not included on Form 851, Affiliations Schedule? For rules of constructive ownership, see instructions.
If “Yes,” complete (i) through (iv) below.
(i) Name of Corporation
(ii) Employer
Identification Number
(if any)
(iii) Country of
Incorporation
(iv) Percentage
Owned in Voting
Stock
b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in any foreign or domestic partnership
(including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions.
If “Yes,” complete (i) through (iv) below.
(i) Name of Entity
(ii) Employer
Identification Number
(if any)
(iii) Country of
Organization
(iv) Maximum
Percentage Owned in
Profit, Loss, or Capital
6 During this tax year, did the corporation pay dividends (other than stock dividends and distributions in exchange for stock) in
excess of the corporation’s current and accumulated earnings and profits? (See sections 301 and 316.) . . . . . . .
If "Yes," file Form 5452, Corporate Report of Nondividend Distributions.
If this is a consolidated return, answer here for the parent corporation and on Form 851 for each subsidiary.
7 At any time during the tax year, did one foreign person own, directly or indirectly, at least 25% of (a) the total voting power of all
classes of the corporation’s stock entitled to vote or (b) the total value of all classes of the corporation’s stock? . . . .
For rules of attribution, see section 318. If “Yes,” enter:
(i) Percentage owned and (ii) Owner’s country
(c) The corporation may have to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign
Corporation Engaged in a U.S. Trade or Business. Enter the number of Forms 5472 attached
8 Check this box if the corporation issued publicly offered debt instruments with original issue discount . . . . . .
If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments.
9 Enter the amount of tax-exempt interest received or accrued during the tax year $
10 Enter the number of shareholders at the end of the tax year (if 100 or fewer)
11 If the corporation has an NOL for the tax year and is electing to forego the carryback period, check here . . . . .
If the corporation is filing a consolidated return, the statement required by Regulations section 1.1502-21(b)(3) must be attached
or the election will not be valid.
12 Enter the available NOL carryover from prior tax years (do not reduce it by any deduction on line 29a.) $
13 Are the corporation’s total receipts (line 1c plus lines 4 through 10 on page 1) for the tax year and its total assets at the end of
the tax year less than $250,000? . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If “Yes,” the corporation is not required to complete Schedules L, M-1, and M-2 on page 5. Instead, enter the total amount of cash
distributions and the book value of property distributions (other than cash) made during the tax year. $
14 Is the corporation required to file Schedule UTP (Form 1120), Uncertain Tax Position Statement (see instructions)? . . . .
If “Yes,” complete and attach Schedule UTP.
15a Did the corporation make any payments in 2011 that would require it to file Form(s) 1099 (see instructions)? . . . . . .
b If “Yes,” did or will the corporation file all required Forms 1099? . . . . . . . . . . . . . . . . . . .
Form 1120 (2011)
Form 1120 (2011) Page 5
Schedule L Balance Sheets per Books Beginning of tax year End of tax year
( ) ( )
( ) ( )
( ) ( )
( ) ( )
( ) ( )
Assets (a) (b) (c) (d)
1 Cash . . . . . . . . . . . .
2a Trade notes and accounts receivable . . .
b Less allowance for bad debts . . . . .
3 Inventories . . . . . . . . . . .
4 U.S. government obligations . . . . .
5 Tax-exempt securities (see instructions) . .
6 Other current assets (attach schedule) . . .
7 Loans to shareholders . . . . . . .
8 Mortgage and real estate loans . . . . .
9 Other investments (attach schedule) . . .
10a Buildings and other depreciable assets . .
b Less accumulated depreciation . . . . .
11a Depletable assets . . . . . . . . .
b Less accumulated depletion . . . . . .
12 Land (net of any amortization) . . . . .
13a Intangible assets (amortizable only) . . .
b Less accumulated amortization . . . . .
14 Other assets (attach schedule) . . . . .
15 Total assets . . . . . . . . . .
Liabilities and Shareholders’ Equity
16 Accounts payable . . . . . . . . .
17 Mortgages, notes, bonds payable in less than 1 year
18 Other current liabilities (attach schedule) . .
19 Loans from shareholders . . . . . . .
20 Mortgages, notes, bonds payable in 1 year or more
21 Other liabilities (attach schedule) . . . .
22 Capital stock: a Preferred stock . . . .
b Common stock . . . .
23 Additional paid-in capital . . . . . . .
24 Retained earnings—Appropriated (attach schedule)
25 Retained earnings—Unappropriated . . .
26 Adjustments to shareholders’ equity (attach schedule)
27 Less cost of treasury stock . . . . . .
28 Total liabilities and shareholders’ equity . .
Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return
Note: Schedule M-3 required instead of Schedule M-1 if total assets are $10 million or more—see instructions
1 Net income (loss) per books . . . . . .
2 Federal income tax per books . . . . .
3 Excess of capital losses over capital gains .
4 Income subject to tax not recorded on books
this year (itemize):
5 Expenses recorded on books this year not
deducted on this return (itemize):
a Depreciation . . . . $
b Charitable contributions . $
c Travel and entertainment . $
6 Add lines 1 through 5 . . . . . . . .
7 Income recorded on books this year
not included on this return (itemize):
Tax-exempt interest $
8 Deductions on this return not charged
against book income this year (itemize):
a Depreciation . . $
b Charitable contributions $
9 Add lines 7 and 8 . . . . . .
10 Income (page 1, line 28)—line 6 less line 9
Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L)
1 Balance at beginning of year . . . . .
2 Net income (loss) per books . . . . . .
3 Other increases (itemize):
4 Add lines 1, 2, and 3 . . . . . . . .
5 Distributions: a Cash . . . .
b Stock . . . .
c Property . . .
6 Other decreases (itemize):
7 Add lines 5 and 6 . . . . . .
8 Balance at end of year (line 4 less line 7)
Form 1120 (