Form 4797 Department of the Treasury Internal Revenue Service Name(s) shown on return Sales of Business Property (Also Involuntary Conversions and Recapture Amounts Under Sections 179 and 280F(b)(2)) Attach to your tax return. Go to www.irs.gov/Form4797 for instructions and the latest information. OMB No. 1545-0184 2023 Attachment Sequence No. 27 Identifying number 1a Enter the gross proceeds from sales or exchanges reported to you for 2023 on Form(s) 1099-B or 1099-S (or substitute statement) that you are including on line 2, 10, or 20. See instructions 1a . b Enter the total amount of gain that you are including on lines 2, 10, and 24 due to the partial dispositions of MACRS assets 1b C . Enter the total amount of loss that you are including on lines 2 and 10 due to the partial dispositions of MACRS assets 1c Part I Sales or Exchanges of Property Used in a Trade or Business and Involuntary Conversions From Other Than Casualty or Theft-Most Property Held More Than 1 Year (see instructions) 2 (a) Description of property (b) Date acquired (mo., day, yr.) (c) Date sold (mo., day, yr.) (d) Gross sales price (e) Depreciation allowed or allowable since acquisition (f) Cost or other basis, plus improvements and expense of sale (g) Gain or (loss) Subtract (f) from the sum of (d) and (e) 3 Gain, if any, from Form 4684, line 39 4 Section 1231 gain from installment sales from Form 6252, line 26 or 37 5 Section 1231 gain or (loss) from like-kind exchanges from Form 8824 6 Gain, if any, from line 32, from other than casualty or theft . 7 34 5 6 Combine lines 2 through 6. Enter the gain or (loss) here and on the appropriate line as follows Partnerships and S corporations. Report the gain or (loss) following the instructions for Form 1065, Schedule K, line 10, or Form 1120-S, Schedule K, line 9. Skip lines 8, 9, 11, and 12 below. Individuals, partners, S corporation shareholders, and all others. If line 7 is zero or a loss, enter the amount from line 7 on line 11 below and skip lines 8 and 9. If line 7 is a gain and you didn't have any prior year section 1231 losses, or they were recaptured in an earlier year, enter the gain from line 7 as a long-term capital gain on the Schedule D filed with your return and skip lines 8, 9, 11, and 12 below. Nonrecaptured net section 1231 losses from prior years. See instructions 7 8 8 9 Subtract line 8 from line 7. If zero or less, enter -0-. If line 9 is zero, enter the gain from line 7 on line 12 below. If line 9 is more than zero, enter the amount from line 8 on line 12 below and enter the gain from line 9 as a long-term capital gain on the Schedule D filed with your return. See instructions 9 Ordinary Gains and Losses (see instructions) Part II 10 Ordinary gains and losses not included on lines 11 through 16 (include property held 1 year or less): 11 Loss, if any, from line 7 12 Gain, if any, from line 7 or amount from line 8, if applicable. 13 Gain, if any, from line 31. 14 Net gain or (loss) from Form 4684, lines 31 and 38a. 15 Ordinary gain from installment sales from Form 6252, line 25 or 36 16 17 Ordinary gain or (loss) from like-kind exchanges from Form 8824 Combine lines 10 through 16 18 For all except individual returns, enter the amount from line 17 on the appropriate line of your return and skip lines a and b below. For individual returns, complete lines a and b below. a If the loss on line 11 includes a loss from Form 4684, line 35, column (b)(ii), enter that part of the loss here. Enter the loss from income-producing property on Schedule A (Form 1040), line 16. (Do not include any loss on property used as an employee.) Identify as from "Form 4797, line 18a." See instructions b Redetermine the gain or (loss) on line 17 excluding the loss, if any, on line 18a. Enter here and on Schedule 1 (Form 1040), Part I, line 4 For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 130861 11 12 13 14 15 16 17 18a 18b Form 4797 (2023) Form 4797 (2023) Part III 19 A Gain From Disposition of Property Under Sections 1245, 1250, 1252, 1254, and 1255 (see instructions) (a) Description of section 1245, 1250, 1252, 1254, or 1255 property: (b) Date acquired (mo., day, yr.) B с D Page 2 (c) Date sold (mo., day, yr.) Property A Property B 2222 20 These columns relate to the properties on lines 19A through 19D. Gross sales price (Note: See line 1a before completing.) . 21 Cost or other basis plus expense of sale. Property C Property D 23 Depreciation (or depletion) allowed or allowable Adjusted basis. Subtract line 22 from line 21. 2222 20 21 23 25 224 Total gain. Subtract line 23 from line 20 If section 1245 property: a Depreciation allowed or allowable from line 22 b Enter the smaller of line 24 or 25a 24 25a 25b 26 If section 1250 property: If straight line depreciation was used, enter -0- on line 26g, except for a corporation subject to section 291. a Additional depreciation after 1975. See instructions 26a b Applicable percentage multiplied by the smaller of line 24 or line 26a. See instructions 26b C Subtract line 26a from line 24. If residential rental property or line 24 isn't more than line 26a, skip lines 26d and 26e 26c d Additional depreciation after 1969 and before 1976 26d . e Enter the smaller of line 26c or 26d 26e of Section 291 amount (corporations only) 26f g Add lines 26b, 26e, and 26f 26g 27 If section 1252 property: Skip this section if you didn't dispose of farmland or if this form is being completed for a partnership. a Soil, water, and land clearing expenses 27a b Line 27a multiplied by applicable percentage. See instructions 27b C Enter the smaller of line 24 or 27b 27c 28 If section 1254 property: a Intangible drilling and development costs, expenditures for development of mines and other natural deposits, mining exploration costs, and depletion. See instructions 28a b Enter the smaller of line 24 or 28a 28b 29 If section 1255 property: a Applicable percentage of payments excluded from income under section 126. See instructions 29a . 29b b Enter the smaller of line 24 or 29a. See instructions Summary of Part III Gains. Complete property columns A through D through line 29b before going to line 30. 30 Total gains for all properties. Add property columns A through D, line 24 30 31 Add property columns A through D, lines 25b, 26g, 27c, 28b, and 29b. Enter here and on line 13 31 32 Subtract line 31 from line 30. Enter the portion from casualty or theft on Form 4684, line 33. Enter the portion from other than casualty or theft on Form 4797, line 6 32 Part IV Recapture Amounts Under Sections 179 and 280F(b)(2) When Business Use Drops to 50% or Less (see instructions) (a) Section 179 (b) Section 280F(b)(2) 33 34 Section 179 expense deduction or depreciation allowable in prior years Recomputed depreciation. See instructions 33 34 . 35 Recapture amount. Subtract line 34 from line 33. See the instructions for where to report 35 Form 4797 (2023)/n Form 4562 Department of the Treasury Internal Revenue Service Name(s) shown on return Part I Depreciation and Amortization (Including Information on Listed Property) Attach to your tax return. Go to www.irs.gov/Form4562 for instructions and the latest information. Business or activity to which this form relates Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part I. 1 Maximum amount (see instructions) . 2 Total cost of section 179 property placed in service (see instructions) 3 Threshold cost of section 179 property before reduction in limitation (see instructions) 4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- 5 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married filing separately, see instructions 6 (a) Description of property (b) Cost (business use only) OMB No. 1545-0172 2023 Attachment Sequence No. 179 Identifying number 1 2 3 4 5 (c) Elected cost 7 Listed property. Enter the amount from line 29 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 9 Tentative deduction. Enter the smaller of line 5 or line 8 8 9 10 Carryover of disallowed deduction from line 13 of your 2022 Form 4562. 10 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5. See instructions 12 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 11 12 13 Carryover of disallowed deduction to 2024. Add lines 9 and 10, less line 12 Note: Don't use Part II or Part III below for listed property. Instead, use Part V. 13 Part II Special Depreciation Allowance and Other Depreciation (Don't include listed property. See instructions.) 14 Special depreciation allowance for qualified property (other than listed property) placed in service during the tax year. See instructions. 14 15 16 15 Property subject to section 168(f)(1) election 16 Other depreciation (including ACRS) Part III MACRS Depreciation (Don't include listed property. See instructions.) Section A 17 MACRS deductions for assets placed in service in tax years beginning before 2023 18 If you are electing to group any assets placed in service during the tax year into one or more general asset accounts, check here 17 Section B-Assets Placed in Service During 2023 Tax Year Using the General Depreciation System (b) Month and year (a) Classification of property placed in service (c) Basis for depreciation (business/investment use only-see instructions) (d) Recovery period (e) Convention 19a 3-year property b 5-year property с 7-year property (f) Method (g) Depreciation deduction d 10-year property e 15-year property f 20-year property g 25-year property 25 yrs. S/L h Residential rental 27.5 yrs. MM S/L 27.5 yrs. MM S/L property i Nonresidential real 39 yrs. MM S/L MM S/L property Section C-Assets Placed in Service During 2023 Tax Year Using the Alternative Depreciation System S/L 20a Class life b 12-year c 30-year 12 yrs. 30 yrs. 40 yrs. S/L MM S/L MM S/L d 40-year Part IV Summary (See instructions.) 21 Listed property. Enter amount from line 28 22 Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21. Enter here and on the appropriate lines of your return. Partnerships and S corporations—see instructions 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs. For Paperwork Reduction Act Notice, see separate instructions. 23 Cat. No. 12906N 21 22 Form 4562 (2023) Form 4562 (2023) Part V Listed Property (Include automobiles, certain other vehicles, certain aircraft, and property used for entertainment, recreation, or amusement.) Page 2 Note: For any vehicle for which you are using the standard mileage rate or deducting lease expense, complete only 24a, 24b, columns (a) through (c) of Section A, all of Section B, and Section C if applicable. Section A-Depreciation and Other Information (Caution: See the instructions for limits for passenger automobiles.) 24a Do you have evidence to support the business/investment use claimed? Yes No 24b If "Yes," is the evidence written? Yes (a) (b) (c) Business/ (d) Type of property (list Date placed investment use Cost or other basis vehicles first) in service percentage (e) Basis for depreciation (business/investment (f) Recovery period (g) Method/ (h) Depreciation Convention deduction use only) 25 Special depreciation allowance for qualified listed property placed in service during the tax year and used more than 50% in a qualified business use. See instructions 26 Property used more than 50% in a qualified business use: 25 No (i) Elected section 179 cost % % % 27 Property used 50% or less in a qualified business use: % % % S/L- S/L - |S/L - 28 28 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 29 Add amounts in column (i), line 26. Enter here and on line 7, page 1 Section B-Information on Use of Vehicles 29 Complete this section for vehicles used by a sole proprietor, partner, or other "more than 5% owner," or related person. If you provided vehicles to your employees, first answer the questions in Section C to see if you meet an exception to completing this section for those vehicles. 30 Total business/investment miles driven during the year (don't include commuting miles) 31 Total commuting miles driven during the year 32 Total other personal (noncommuting) miles driven 33 Total miles driven during the year. Add lines 30 through 32 34 Was the vehicle available for personal use during off-duty hours? . 35 Was the vehicle used primarily by a more than 5% owner or related person? 36 Is another vehicle available for personal use? (a) Vehicle 1 (b) (c) Vehicle 2 Vehicle 3 (d) Vehicle 4 (e) (f) Vehicle 5 Vehicle 6 Yes No Yes No Yes No Yes No Yes No Yes No ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ Section C-Questions for Employers Who Provide Vehicles for Use by Their Employees Answer these questions to determine if you meet an exception to completing Section B for vehicles used by employees who aren't more than 5% owners or related persons. See instructions. 37 Do you maintain a written policy statement that prohibits all personal use of vehicles, including commuting, by your employees? . 38 Do you maintain a written policy statement that prohibits personal use of vehicles, except commuting, by your employees? See the instructions for vehicles used by corporate officers, directors, or 1% or more owners you treat all use of vehicles by employees as personal use? 39 Do 40 Do you provide more than five vehicles to your employees, obtain information from your employees about the use of the vehicles, and retain the information received? 41 Do you meet the requirements concerning qualified automobile demonstration use? See instructions Note: If your answer to 37, 38, 39, 40, or 41 is "Yes," don't complete Section B for the covered vehicles. Part VI Amortization (a) Description of costs (b) Date amortization begins (c) Amortizable amount (d) Code section (e) Amortization period or percentage Yes No ☐ ☐ (f) Amortization for this year 42 Amortization of costs that begins during your 2023 tax year (see instructions): 43 Amortization of costs that began before your 2023 tax year 43 44 Total. Add amounts in column (f). See the instructions for where to report 44 Form 4562 (2023)/n SCHEDULE G (Form 1120) (Rev. December 2011) Department of the Treasury Internal Revenue Service Name Information on Certain Persons Owning the Corporation's Voting Stock ►Attach to Form 1120. ► See instructions on page 2. OMB No. 1545-0123 Employer identification number (EIN) Part I Certain Entities Owning the Corporation's Voting Stock. (Form 1120, Schedule K, Question 4a). Complete columns (i) through (v) below for any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or tax-exempt organization that owns directly 20% or more, or owns, directly or indirectly, 50% or more of the total voting power of all classes of the corporation's stock entitled to vote (see instructions). (ii) Employer Identification (i) Name of Entity (iii) Type of Entity Number (if any) (iv) Country of Organization (v) Percentage Owned in Voting Stock Part II Certain Individuals and Estates Owning the Corporation's Voting Stock. (Form 1120, Schedule K, Question 4b). Complete columns (i) through (iv) below for any individual or estate that owns directly 20% or more, or owns, directly or indirectly, 50% or more of the total voting power of all classes of the corporation's stock entitled to vote (see instructions). (i) Name of Individual or Estate (ii) Identifying Number (if any) (iii) Country of Citizenship (see instructions) (iv) Percentage Owned in Voting Stock For Paperwork Reduction Act Notice, see the Instructions for Form 1120. Cat. No. 52684S Schedule G (Form 1120) (Rev. 12-2011) Schedule G (Form 1120) (Rev. 12-2011) General Instructions Purpose of Form Use Schedule G (Form 1120) to provide information applicable to certain entities, individuals, and estates that 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. Who Must File Every corporation that answers "Yes" to Form 1120, Schedule K, Questions 4a or 4b, must file Schedule G to provide the additional information requested for certain entities, individuals, and estates owning the corporation's voting stock. Constructive Ownership of the Corporation For purposes of Schedule G (Form 1120), the constructive ownership rules of section 267(c) (excluding section 267(c)(3)) apply to ownership of interests in corporate stock and ownership of interests in the profit, loss, or capital of a partnership. An interest in the corporation owned directly or indirectly by or for another entity (corporation, partnership, estate, or trust) is considered to be owned proportionately by the owners (shareholders, partners, or beneficiaries) of the owning entity. Also, under section 267(c), an individual is considered to own an interest owned directly or indirectly by or for his or her family. The family of an individual includes only that individual's spouse, brothers, sisters, ancestors, and lineal descendants. An interest will be attributed from an individual under the family attribution rules only if the person to whom the interest is attributed owns a direct or an indirect interest in the corporation under section 267(c)(1) or (5). However, for purposes of these instructions, an individual will not be considered to own, under section 267(c)(2), an interest in the corporation owned, directly or indirectly, by a family member unless the individual also owns an interest in the corporation either directly or indirectly through a corporation, partnership or trust. Example 1. Corporation A owns, directly, a 50% interest in the profit, loss, or capital of Partnership B. Corporation A also owns, directly, a 15% interest in the profit, loss, or capital of Partnership C and owns, directly, 15% of the voting stock of Corporation D. Partnership B owns, directly, a 70% interest in the profit, loss, or capital of Partnership C and owns, directly, 70% of the voting stock of Corporation D. Corporation A owns, indirectly, through Partnership B, a 35% interest (50% of 70%) in the profit, loss, or capital of Partnership C and owns, indirectly, 35% of the voting stock of Corporation D. Corporation A owns, directly or indirectly, a 50% interest in the profit, loss, or capital of Partnership C (15% directly and 35% indirectly), and owns, directly or indirectly, 50% of the voting stock of Corporation D (15% directly and 35% indirectly). Corporation D reports in Part I that its voting stock is owned, directly or indirectly, 50% by Corporation A and is owned, directly, 70% by Partnership B. Example 2. A owns, directly, 50% of the voting stock of Corporation X. B, the daughter of A, does not own, directly, any interest in Corporation X and does not own, indirectly, any interest in Corporation X through any entity (corporation, partnership, trust, or estate). Therefore, the family attribution rules do not apply and, for the purposes of Part II, the 50% interest of A in Corporation X is not attributed to B. Example 3. A owns, directly, 50% of the voting stock of Corporation X. B, the daughter of A, does not own, directly, any interest in X but does own, indirectly, 10% of the voting stock of Corporation X through Trust T of which she is the sole beneficiary. No other family member of A or B owns, directly, any interest in Corporation X nor does any own, indirectly, any interest in Corporation X through any entity. Neither A nor B owns any other interest in Corporation X through any entity. For the purposes of Part II, the 50% interest of A in the voting stock of Corporation X is attributed to B and the 10% interest of B in the voting stock of Corporation X is attributed to A. A owns, directly or indirectly, 60% of the voting stock of Corporation X, 50% directly and 10% indirectly through B. B owns, directly or indirectly, 60% of the voting stock of Corporation X (50% indirectly through A and 10% indirectly through Trust T). Specific Instructions Part I Page 2 Complete Part I if the corporation answered "Yes" to Form 1120, Schedule K, Question 4a. List each foreign or domestic corporation, partnership, trust, or tax- exempt organization that owns, at the end of the tax year, directly 20% or more, or owns, directly or indirectly, 50% or more of the total voting power of all classes of the corporation's stock entitled to vote. Indicate the name of the entity, employer identification number (if any), type of entity (corporation, partnership, trust, or tax- exempt organization), country of organization, and the percentage owned, directly or indirectly, of the voting stock of the corporation. For an affiliated group filing a consolidated tax return, list the parent corporation rather than the subsidiary members. List the entity owner of a disregarded entity rather than the disregarded entity. If the owner of a disregarded entity is an individual rather than an entity, list the individual in Part II. Part II Complete Part II if the corporation answered "Yes" to Form 1120, Schedule K, Question 4b. List each individual or estate that owns, at the end of the tax year, directly 20% or more, or owns, directly or indirectly, 50% or more, of the total voting power of all classes of the corporation's stock entitled to vote. Indicate the name of the individual or estate, taxpayer identification number (if any), country of citizenship (for an estate, the citizenship of the decedent), and the percentage owned, directly or indirectly, of the voting stock of the corporation./n Form 1125-E (Rev. October 2016 ) Department of the Treasury Internal Revenue Service Name Compensation of Officers ► Attach to Form 1120, 1120-C, 1120-F, 1120-REIT, 1120-RIC, or 1120S. >> Information about Form 1125 - E and its separate instructions is at www.irs.gov/form1125e. OMB No. 1545-0123 Employer identification number Note: Complete Form 1125 E only if total receipts are $500,000 or more. See instructions for definition of total receipts. 1 (a) Name of officer (b) Social security number (see instructions ) (c) Percent of time devoted to business Percent of stock owned (d) Common (e) Preferred (f) Amount of compensation % % % % % % % % % % % % % % % % % % % % % % % % % Jo % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % 2 Total compensation of officers 2 3 Compensation of officers claimed on Form 1125-A or elsewhere on return 3 4 Subtract line 3 from line 2. Enter the result here and on Form 1120, page 1, line 12 or the appropriate line of your tax return 4 For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 55989C Form 1125-E (Rev. 10-2016)/n Form 1125-A (Rev. November 2018) Department of the Treasury Internal Revenue Service Name Cost of Goods Sold ► Attach to Form 1120, 1120-C, 1120-F, 1120S, or 1065. ► Go to www.irs.gov/Form1125A for the latest information. OMB No. 1545-0123 Employer identification number 1 Inventory at beginning of year 2 Purchases 3 Cost of labor 4 Additional section 263A costs (attach schedule) 5 Other costs (attach schedule) 6 Total. Add lines 1 through 5. 7 Inventory at end of year 8 123 45 Cost of goods sold. Subtract line 7 from line 6. Enter here and on Form 1120, page 1, line 2 or the appropriate line of your tax return. See instructions 10. 6 7 00 8 9a Check all methods used for valuing closing inventory: (i) Cost (ii) Lower of cost or market (iii) Other (Specify method used and attach explanation.) b Check if there was a writedown of subnormal goods с Check if the LIFO inventory method was adopted this tax year for any goods (if checked, attach Form 970) ☐ ☐ d If the LIFO inventory method was used for this tax year, enter amount of closing inventory computed under LIFO . 9d e f If property is produced or acquired for resale, do the rules of section 263A apply to the entity? See instructions Was there any change in determining quantities, cost, or valuations between opening and closing inventory? If "Yes," attach explanation Yes No Yes No Section references are to the Internal Revenue Code unless otherwise noted. What's New Small business taxpayers. For tax years beginning after December 31, 2017, the following apply. • A small business taxpayer (defined below), may use a method of accounting for inventories that either: (1) treats inventories as nonincidental materials and supplies, or (2) conforms to the taxpayer's financial accounting treatment of inventories. • A small business taxpayer is not required to capitalize costs under section 263A. General Instructions Purpose of Form Use Form 1125-A to calculate and deduct cost of goods sold for certain entities. Who Must File Filers of Form 1120, 1120-C, 1120-F, 1120S, or 1065, must complete and attach Form 1125-A if the applicable entity reports a deduction for cost of goods sold. Inventories Generally, inventories are required at the beginning and end of each tax year if the production, purchase, or sale of merchandise is an income-producing factor. See Regulations section 1.471-1. If inventories are required, you generally must use an accrual method of accounting for sales and purchases of inventory items. Exception for certain taxpayers. A small business taxpayer (defined below), can adopt or change its accounting method to account for inventories in the same manner as material and supplies that are non- incidental, or conform to its treatment of inventories in an applicable financial statement (as defined in section 451(b)(3)), or if it does not have an applicable financial statement, the method of accounting used in its books and records prepared in accordance with its accounting procedures. See section 471(c)(3). A small business taxpayer claiming exemption from the requirement to keep inventories is changing its method of accounting for purposes of section 481. For additional guidance on this method of accounting, see Pub. 538, Accounting Periods and Methods. For guidance on changing to this method of accounting, see Form 3115 and the Instructions for Form 3115. Small business taxpayer. A small business taxpayer is a taxpayer that (a) has average annual gross receipts of $25 million or less (indexed for inflation) for the 3 prior tax years, and (b) is not a tax shelter (as defined in section 448(d)(3)). See Pub. 538. Uniform capitalization rules. The uniform capitalization rules of section 263A generally require you to capitalize, or include in inventory, certain costs incurred in connection with the following. • The production of real property and tangible personal property held in inventory or held for sale in the ordinary course of business. • Real property or personal property (tangible and intangible) acquired for resale. • The production of real property and tangible personal property for use in its trade or business or in an activity engaged in for profit. A small business taxpayer (defined above) is not required to capitalize costs under section 263A. See section 263A(i). See the discussion on section 263A uniform capitalization rules in the instructions for your tax return before completing Form 1125-A. Also see Regulations sections 1.263A-1 through 1.263A-3. See Regulations section 1.263A-4 for rules for property produced in a farming business. For Paperwork Reduction Act Notice, see instructions. Cat. No. 55988R Form 1125-A (Rev. 11-2018) Form 1125-A (Rev. 11-2018) Specific Instructions Line 1. Inventory at Beginning of Year If you are changing your method of accounting for the current tax year, you must refigure last year's closing inventory using the new method of accounting. Enter the result on line 1. If there is a difference between last year's closing inventory and the refigured amount, attach an explanation and take it into account when figuring any section 481(a) adjustment. Line 2. Purchases Reduce purchases by items withdrawn for personal use. For a partnership, the cost of these items should be shown on Schedule K and Schedule K-1 as distributions to partners. Line 4. Additional Section 263A Costs If you elected a simplified method of accounting, enter on line 4 the balance of section 263A costs paid or incurred during the tax year not includible on lines 2, 3, and 5. If you elected the simplified production method, additional section 263A costs are generally those costs, other than interest, that were not capitalized under your method of accounting immediately prior to the effective date of section 263A, but are now required to be capitalized under section 263A. For details, see Regulations section 1.263A-2(b). If you elected the simplified resale method, additional section 263A costs are generally those costs incurred with respect to the following categories. • Off-site storage or warehousing. • Purchasing. Handling, such as processing, assembling, repackaging, and transporting. • General and administrative costs (mixed service costs). Line 5. Other Costs Enter on line 5 any costs paid or incurred during the tax year not entered on lines 2 through 4. Attach a statement listing details of the costs. Special Rules for Cooperatives Cooperatives are allowed to deduct certain per-unit retain allocations. Include these costs on line 5. Attach a statement listing details of per-unit retain allocations paid in: • Qualified per-unit retain certificates, • Money or other property (except nonqualified per-unit certificates), and • Nonqualified per-unit retain certificates redeemed this year. Per-unit retain allocations. A cooperative is allowed to deduct from its taxable income amounts paid during the payment period for the tax year as per-unit retain allocations to the extent paid in money, qualified per-unit retain certificates, or other property with respect to marketing occurring during the tax year. A per-unit retain allocation is any allocation from a cooperative to a patron for products marketed for him without reference to the cooperative net earnings. A qualified per- unit retain certificate is any per-unit retain certificate that the distributee has agreed to take into account at its stated dollar amount. Nonqualified per-unit retain certificates redeemed this year. Include the amount paid in money or other property (except amounts already included as per-unit retain certificates) to patrons to redeem nonqualified per-unit retain certificates. No deduction is allowed at the time of issuance for a nonqualified per-unit retain certificate. However, the cooperative may take a deduction in the year the certificate is redeemed, subject to the stated dollar amount of the certificate. See section 1383. Also see the instructions for Form 1120-C, line 30h, for a special rule for figuring the cooperative's tax in the year of redemption of a nonqualified per-unit retain certificate. Line 7. Inventory at End of Year See Regulations sections 1.263A-1 through 1.263A-3 for details on figuring the amount of additional section 263A costs to be included in ending inventory. Line 8. Cost of Goods Sold Enter the amount from line 8 on your tax return as follows. Filers of Form 1120, 1120-C, 1120S, and 1065, enter cost of goods sold on page 1, line 2. Filers of Form 1120-F, enter cost of goods sold on Section II, line 2. Lines 9a Through 9f. Inventory Valuation Methods Inventories can be valued at: • Cost, • Cost or market value (whichever is lower), or • Any other method approved by the IRS that conforms to the requirements of the applicable regulations cited below. Page 2 Filers that use erroneous valuation methods must change to a method permitted for federal income tax purposes. Use Form 3115 to make this change. See the Instructions for Form 3115. Also see Pub. 538. Line 9a. Method of valuing closing inventory. On line 9a, check the method(s) used for valuing inventories. Under lower of cost or market, the term "market" (for normal goods) means the current bid price prevailing on the inventory valuation date for the particular merchandise in the volume usually purchased by the filer. For a manufacturer, market applies to the basic elements of cost-raw materials, labor, and burden. If section 263A applies, the basic elements of cost must reflect the current bid price of all direct costs and all indirect costs properly allocable to goods on hand at the inventory date. Inventory may be valued below cost when the merchandise is unsalable at normal prices or unusable in the normal way because the goods are subnormal due to damage, imperfections, shopwear, change of style, odd or broken lots, or other similar causes, including second- hand goods taken in exchange. The goods may be valued at the bona fide selling price, minus the direct cost of disposition (but not less than scrap value). Bona fide selling price means actual offering of goods during a period ending not later than 30 days after inventory date. Lines 9c and 9d. LIFO method. If this is the first year the Last-in, First-out (LIFO) inventory method was either adopted or extended to inventory goods not previously valued under the LIFO method provided in section 472, attach Form 970, Application To Use LIFO Inventory Method, or a statement with the information required by Form 970. Check the LIFO box on line 9c. On line 9d, enter the amount of total closing inventories computed under section 472. Estimates are acceptable. If you changed or extended your inventory method to LIFO and had to write up the opening inventory to cost in the year of election, report the effect of the write-up as other income, on your applicable return, proportionately over a 3-year period that begins with the year of the LIFO election. Form 1125-A (Rev. 11-2018) Note: Entities using the LIFO method that make an S corporation election or transfer LIFO inventory to an S corporation in a nonrecognition transaction may be subject to an additional tax attributable to the LIFO recapture amount. See the instructions for Form 1120, Schedule J, line 11. Line 9e. If property is produced or acquired for resale and the rules of section 263A apply to the corporation, cooperative, partnership, or other applicable entity, check the "Yes" box on line 9e. Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. Page 3 The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for business taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the estimates shown in the instructions for their business income tax return. If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed./n TYPE OR PRINT Number, street, and room or suite no. If a P.O. box, see instructions. City or town, state or province, country, and ZIP or foreign postal code 1a E Check if: (1) Gross receipts or sales Initial return (2) Form 1120 Department of the Treasury Internal Revenue Service A Check if: 1a Consolidated return (attach Form 851) b Life/nonlife consoli- dated return. 2 Personal holding co. (attach Sch. PH). 3 Personal service corp. (see instructions) . 4 Schedule M-3 attached U.S. Corporation Income Tax Return For calendar year 2023 or tax year beginning Name 2023, ending Go to www.irs.gov/Form1120 for instructions and the latest information. 20 OMB No. 1545-0123 2023 B Employer identification number C Date incorporated D Total assets (see instructions) $ Final return (3) Name change (4) Address change 1a b Returns and allowances 1b с Balance. Subtract line 1b from line 1a. 2 Cost of goods sold (attach Form 1125-A). 3 Gross profit. Subtract line 2 from line 1c Income 4 567890 Dividends and inclusions (Schedule C, line 23) 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) 9 1c 2 3 4 5 6 7 8 10 10 11 Total income. Add lines 3 through 10. 11 Deductions (See instructions for limitations on deductions.) 12 Compensation of officers (see instructions-attach Form 1125-E) 12 13 Salaries and wages (less employment credits) 13 14 Repairs and maintenance 14 15 Bad debts. 15 16 16 Rents 17 Taxes and licenses 17 19 21 82222222 18 Interest (see instructions) 18 Charitable contributions . 19 20 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) 20 Depletion 21 Advertising 22 23 Pension, profit-sharing, etc., plans 23 24 Employee benefit programs 24 25 Energy efficient commercial buildings deduction (attach Form 7205) 25 26 Other deductions (attach statement) 26 27 Total deductions. Add lines 12 through 26 27 28 29a Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11. Net operating loss deduction (see instructions) 28 29a b Special deductions (Schedule C, line 24) . 29b с Add lines 29a and 29b 29c 30 Tax, Refundable Credits, and Payments 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 34 Estimated tax penalty. See instructions. Check if Form 2220 is attached 34 35 36 37 Sign Amount owed. If line 33 is smaller than the total of lines 31 and 34, enter amount owed Overpayment. If line 33 is larger than the total of lines 31 and 34, enter amount overpaid Enter amount from line 36 you want: Credited to 2024 estimated tax 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. 35 36 Refunded 37 Here May the IRS discuss this return with the preparer shown below? See instructions. Signature of officer Print/Type preparer's name Date Title Preparer's signature Date Paid Preparer Use Only Firm's name Firm's address Check self-employed Firm's EIN Phone no. Yes PTIN if No For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11450Q Form 1120 (2023) Form 1120 (2023) Schedule 1 2 Dividends, Inclusions, and Special Deductions (see instructions) Dividends from less-than-20%-owned domestic corporations (other than debt-financed stock) Dividends from 20%-or-more-owned domestic corporations (other than debt-financed stock) (a) Dividends and inclusions (b) % 50 65 Page 2 (c) Special deductions (a) x (b) 3 Dividends on certain debt-financed stock of domestic and foreign corporations See instructions 4 Dividends on certain preferred stock of less-than-20%-owned public utilities 23.3 5 Dividends on certain preferred stock of 20%-or-more-owned public utilities . 26.7 6 Dividends from less-than-20%-owned foreign corporations and certain FSCs 50 7 Dividends from 20%-or-more-owned foreign corporations and certain FSCs 65 8 Dividends from wholly owned foreign subsidiaries 9 Subtotal. Add lines 1 through 8. See instructions for limitations 100 See instructions 10 Dividends from domestic corporations received by a small business investment company operating under the Small Business Investment Act of 1958 100 11 Dividends from affiliated group members 100 12 Dividends from certain FSCs 100 13 Foreign-source portion of dividends received from a specified 10%-owned foreign corporation (excluding hybrid dividends) (see instructions) 100 14 Dividends from foreign corporations not included on line 3, 6, 7, 8, 11, 12, or 13 (including any hybrid dividends). 15 Reserved for future use 16a b с Subpart F inclusions derived from the sale by a controlled foreign corporation (CFC) of the stock of a lower-tier foreign corporation treated as a dividend (attach Form(s) 5471) (see instructions) Subpart F inclusions derived from hybrid dividends of tiered corporations (attach Form(s) 5471) (see instructions) Other inclusions from CFCs under subpart F not included on line 16a, 16b, or 17 (attach Form(s) 5471) (see instructions) . 17 Global Intangible Low-Taxed Income (GILTI) (attach Form(s) 5471 and Form 8992). 18 Gross-up for foreign taxes deemed paid 19 IC-DISC and former DISC dividends not included on line 1, 2, or 3 20 20 Other dividends 224 21 Deduction for dividends paid on certain preferred stock of public utilities 222 22 Section 250 deduction (attach Form 8993) 23 Total dividends and inclusions. Add column (a), lines 9 through 20. Enter here and on page 1, line 4 . 100 24 Total special deductions. Add column (c), lines 9 through 22. Enter here and on page 1, line 29b Form 1120 (2023) Form 1120 (2023) Schedule J Part I-Tax Computation Tax Computation and Payment (see instructions) 1 1 Income tax. See instructions . 2 Base erosion minimum tax amount (attach Form 8991) 2 3 Corporate alternative minimum tax from Form 4626, Part II, line 13 (attach Form 4626). 3 4 4 Add lines 1, 2, and 3. 5a Foreign tax credit (attach Form 1118) 5a b Credit from Form 8834 (see instructions) 5b C General business credit (see instructions-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 9a Recapture of investment credit (attach Form 4255) 9a b Recapture of low-income housing credit (attach Form 8611) 9b с 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 Interest/tax due under section 453A(c). 9f g Interest/tax due under section 453(1) 9g Z Other (see instructions-attach statement) 9z 10 11 Total. Add lines 9a through 9z Total tax. Add lines 7, 8, and 10. Enter here and on page 1, line 31 Part II-Payments and Refundable Credits 10 11 12 Reserved for future use 13 Preceding year's overpayment credited to the current year 14 Current year's estimated tax payments 15 Current year's refund applied for on Form 4466 16 Combine lines 13, 14, and 15 17 Tax deposited with Form 7004 18 Withholding (see instructions) 19 Total payments. Add lines 16, 17, and 18. 20 Refundable credits from: a Form 2439 b Form 4136. C Reserved for future use Z Other (attach statement-see instructions) 21 Total credits. Add lines 20a through 20z 22 Elective payment election amount from Form 3800 23 Total payments and credits. Add lines 19, 21, and 22. Enter here and on page 1, line 33. 12 13 14 15 16 17 18 19 Page 3 20a 20b 20c 20z 21 22 23 Form 1120 (2023) Form 1120 (2023) Page 4 Accrual C Other (specify) Yes No Schedule K Other Information (see instructions) 1 Check accounting method: a Cash b 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 5 b 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) . 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) At the end of the tax year, did the corporation: 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 7 8 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. See the instructions for Form 5452. If this is a consolidated return, answer here for the parent corporation and on Form 851 for each subsidiary. At any time during this tax year, did one foreign person own, directly or indirectly, at least 25% of the total voting power of all classes of the corporation's stock entitled to vote or at least 25% of the total value of all classes of the corporation's stock? For rules of attribution, see section 318. If "Yes," enter: (a) Percentage owned and (b) 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 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. Enter the amount of tax-exempt interest received or accrued during this tax year $ 9 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 (see instructions) 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 reported on page 1, line 29a) Form 1120 (2023) Form 1120 (2023) Schedule K 13 Other Information (continued from page 4) Are the corporation's total receipts (page 1, line 1a, plus lines 4 through 10) 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. Instead, enter the total amount of cash distributions and the book value of property distributions (other than cash) made during this tax year $ Did the corporation make any payments that would require it to file Form(s) 1099? . 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 b 16 17 18 19 20 220 21 22 23 24 a b If "Yes," did or will the corporation file required Form(s) 1099? . During this tax year, did the corporation have an 80%-or-more change in ownership, including a change due to redemption of its own stock? During or subsequent to this tax year, but before the filing of this return, did the corporation dispose of more than 65% (by value) of its assets in a taxable, non-taxable, or tax deferred transaction? Did this corporation receive assets in a section 351 transfer in which any of the transferred assets had a fair market basis or fair market value of more than $1 million? . During this corporation's tax year, did the corporation make any payments that would require it to file Forms 1042 and 1042-S under chapter 3 (sections 1441 through 1464) or chapter 4 (sections 1471 through 1474) of the Code? . Is the corporation operating on a cooperative basis? During this tax year, did the corporation pay or accrue any interest or royalty for which the deduction is not allowed under section 267A? See instructions_ If "Yes," enter the total amount of the disallowed deductions $ Does this corporation have gross receipts of at least $500 million in any of the 3 preceding tax years? (See sections 59A(e)(2) and (3).) If "Yes," complete and attach Form 8991. Did the corporation have an election under section 163 (j) for any real property trade or business or any farming business in effect during this tax year? See instructions . Does the corporation satisfy one or more of the following? If "Yes," complete and attach Form 8990. See instructions The corporation owns a pass-through entity with current, or prior year carryover, excess business interest expense. The corporation's aggregate average annual gross receipts (determined under section 448(c)) for the 3 tax years preceding the current tax year are more than $29 million and the corporation has business interest expense. C The corporation is a tax shelter and the corporation has business interest expense. 25 Is the corporation attaching Form 8996 to certify as a Qualified Opportunity Fund? If "Yes," enter amount from Form 8996, line 15 $ 26 27 Since December 22, 2017, did a foreign corporation directly or indirectly acquire substantially all of the properties held directly or indirectly by the corporation, and was the ownership percentage (by vote or value) for purposes of section 7874 greater than 50% (for example, the shareholders held more than 50% of the stock of the foreign corporation)? If “Yes,” list the ownership percentage by vote and by value. See instructions Percentage: By Vote By Value At any time during this tax year, did the corporation (a) receive a digital asset (as a reward, award, or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)? See instructions 28 Is the corporation a member of a controlled group? If "Yes," attach Schedule O (Form 1120). See instructions. Corporate Alternative Minimum Tax: 29 a Was the corporation an applicable corporation under section 59(k)(1) in any prior tax year? 30 31 b If "Yes," go to question 29b. If "No," skip to question 29c. Is the corporation an applicable corporation under section 59(k)(1) in the current tax year because the corporation was an applicable corporation in the prior tax year? If "Yes," complete and attach Form 4626. If "No," continue to question 29c. с Does the corporation meet the requirements of the safe harbor method as provided under section 59(k)(3)(A) for the current tax year? See instructions If "No," complete and attach Form 4626. If "Yes," the corporation is not required to file Form 4626. Is the corporation required to file Form 7208 relating to the excise tax on repurchase of corporate stock (see instructions): a Under the rules for stock repurchased by a covered corporation (or stock acquired by its specified affiliate)? b Under the applicable foreign corporation rules? C Under the covered surrogate foreign corporation rules? . If "Yes" to either (a), (b), or (c), complete Form 7208, Excise Tax on Repurchase of Corporate Stock. See the Instructions for Form 7208. Is this a consolidated return with gross receipts or sales of $1 billion or more and a subchapter K basis adjustment, as described in the instructions, of $10 million or more?. If "Yes," attach a statement. See instructions. Page 5 Yes No Form 1120 (2023)/n Taxation II - Case #1 - Spring 2024 This tax case must be completed by the posted due date to receive points. You must read ALL of these instructions!! Remember, all tax cases must be completed and submitted to receive credit for this course. Even if you submit them late and receive no points, they must be submitted, or you fail the course no matter what other grades you have per the Class Syllabus. Head over to www.irs.gov and download and save and/or print the following tax forms - all 2023 forms: 1 Form 1120 2 Form 1125-A 3 Form 1125-E 4 Form 1120 Schedule G 5 Form 4562 6 Form 4797 You should print this instruction document and read all of it very carefully - READ IT ALL FIRST AND THEN GO BACK TO START FILLING FORM OUT. There is no reason you shouldn't get all your points if you follow these instructions carefully and submit them on time! I would also suggest you refer to Chapter 17 in your textbook, the lecture notes, particularly the section about Schedule M-1, and review the answers from the Forage Assignment. You'll find all the information on these documents you need to complete the required tax forms listed above. You must read through the questions and forms and fill out all required parts of all forms and pages. On Form 1120, you'll find various lines that tell you to "attach a schedule". You are NOT required to attach any schedules other than the forms listed above. You may just enter the totals that I've provided in these instructions and not attach a schedule. Example, Page 1 of the 1120 asks for "Other Deductions", and I've provided you the "Other deductions" on the Income Statement; however, you may have to add them up. Just plug that into the line on the 1120 labeled "Other Deductions" and don't worry about attaching supporting schedule. Be careful though - you will have Book to Tax Differences on these, so you will put the resulting number after tax adjustments. Please take care and time to fill in the total lines as instructed on the forms AND read all of these instructions and pages carefully. I try to anticipate and answer questions ahead, so you need to take the time to be diligent and answer and fill in totals and fields as instructed. 1 Taxation II - Case #1 - Spring 2024 "A general principle for any and all tax forms: Never enter a number as negative unless it is really a negative number. If you are entering an amount in a field that is a "subtract" field, it must be positive, or the IRS subtracts a negative number, which really adds it! That would throw your return out of balance, so always be sure to enter numbers as positive unless they are truly negative amounts." Another principle: Never write in a shaded box/line on a tax form. Shaded means "do not write in this space!!". It might be confusing if you are typing numbers into PDF forms where the field is highlighted for you to type into. You can tell if you are supposed to type into a field or not. One more principle, always round amounts on these tax returns to whole dollars!! The Case! Here we go! I always recommend printing the forms, filling them in by hand, and then scanning them into Blackboard because this is how you actually learn when doing it by hand. Follow along and see how I would complete the 1120. 1: Review the Financial Statements Attached (Balance Sheet and Income Statement). 2: Review the information below. Form 1120 Be sure to enter the other requested information at the top of Page 1 (name, address, EIN, all the applicable boxes checked or filled in, B, C, D) (NOT an initial return or final return, do not check). Do not forget to fill in Box D Total Assets after you have completed the Balance Sheet (Schedule L) later in the case. Premium Corporation, incorporated December 21, 2012, is a CPA firm. It is located at 125 Main Street, Portage, OH 44828. Its employer identification number is 75-1234562. The Corporation uses the accrual method of accounting. Head over to page 6 of the 1120 and Fill in Schedule L (Balance Sheet per Books) from the Balance Sheet on the Financial Statements. Beginning of the Tax Year is 2022 and End of the Tax Year is 2023. Fill out Schedule M-2. You should have numbers on lines 1, 2, 4, 5a, 7, and 8. Line 1 should match the beginning of the year number from line 25 of Schedule L above and Line 8 of the M-2 should match the end of the year on line 25 of Schedule L. This is like your Retained Earnings Statement from Financial Accounting – remember what goes into it. - 2 Taxation II - Case #1 - Spring 2024 Before we work on our Income Statement and fill out page of the 1120, we need to complete some Book to Tax Differences like you did in the Forage Assignment and in class. Schedule M-1 Head over to the Income Statement and put Book Income on Line 1 of Schedule M-1. Then head over to the Book to Tax Difference Worksheet provided with the Income Statement numbers. Column A is the Book numbers from the Income Statement. Column B is the Book to Tax Adjustments, and Column C is the Taxable Income items that will go on Page 1 of the 1120. For example, Municipal Bond Interest is Not Taxable, so we have a favorable adjustment. In Column A you have $5,000, in Column B you will have negative ($5,000), so Column C is 0. This would make sense because we are not picking it up into income, so our Taxable Income decreased by $5,000. Put this $5,000 on line 7 of the M-1 also. You will need to apply tax laws and what you have learned to the following accounts: Bad Debt Expense (For book, this is an estimate, but for tax it needs to be actual) Head over to the Balance Sheet and look at the change in your Allowance for Doubtful Accounts. What is the amount of the change? This is amount is an estimate and not deductible for tax. Fill this number in on Column B and adjust your Taxable Income. Depreciation Expense and Gain/Loss - you are given book depreciation, but you need to calculate Tax Depreciation. Review the information you learned in Tax I. ○ Stop here and let's fill out Form 4797 and Form 4562 to calculate our Tax Gains and Tax Depreciation. Form 4797 - look at your Balance Sheet for 2022 and 2023 for the Fixed Assets What happened to the cost of the Furniture and Fixtures? Did it go up or down, and by how much? This is your cost. • What happened to the accumulated depreciation for Furniture? Did it go up or down, and by how much? This is your Accumulated Depreciation • What is the Adjusted BOOK Basis in your Furniture sold? Cost minus Accumulated Depreciation • Do we know the Proceeds for the Sale? How could we check? Go to the Income Statement, do you see a Gain or loss on an asset sold? What is your proceeds if your Formula is Proceeds minus Basis Gain/Loss? Back into it! = 3 Taxation II - Case #1 - Spring 2024 • • • On Form 4797, write in the name of the company and EIN. • Skip to line 19a. Description: Furniture, acquired 1/1/2015, Sold • 12/15/2023. Fill in lines 20 through 25b with the information you have from above. Book Tax, so no difference this time. = Complete lines 30, 31, and 32. • When following the instructions on those lines, you should have $10,000 on lines 13 and 17. Form 4562 • • Head over to your Balance Sheet and look at the Machinery and Equipment line, what is the difference between 2022 and 2023? This is your addition. On August 1st, 2023 it was placed in service and is a Five-Year Asset. The company did NOT elect out of bonus (additional first year depreciation), so you will need to calculate the bonus using 2023 information and MACRS depreciation. Bonus will go on line 14 and MACRS will be filled in on 19b. Basis for Depreciation is your Cost minus Bonus. Recovery period 5 years, convention = HY, method = 200DB, depreciation deduction is? See Exhibit 8.3 on page 8-33 of your textbook. Fill out line 22. This is your Tax Depreciation number, which will also go on line 20 of Form 1120, line 20. Now that you have your depreciation deduction, you should be able to figure out what your Book to Tax Difference is. Go to your Book to Tax Worksheet and fill out the Book Depreciation and Tax Depreciation to see if it is favorable or unfavorable. If unfavorable it will go on line 5a and if favorable, line 8a of your M-1. Meals and Entertainment O Meals are 50% deductible and Entertainment is 0% deductible. The client tell you the meals account is ONLY meals. Enter your disallowed portion on line 5c of the M-1. Officer's Life Insurance Expense – these premiums are for beneficial owners of the company and the company is the beneficiary. Review your materials and see if it is deductible. If not deductible, put under line 5c with a description. Federal Income Tax Expense - This is nondeductible, put non-deductible portion on line 2 of the M-1. Charitable Contributions - We're doing this adjustment last because you can only deduct up to 10% of your Taxable Income before Charitable Contributions. Can you deduct all 4 Taxation II - Case #1 - Spring 2024 your Charitable Contributions? If so, no adjustment is needed. If not, you need to reduce your book deduction and add it back for tax. The non-deductible portion goes on line 5b of the M-1. Using the Book to Tax Difference Worksheet, you should have $2,825,000 as Gross Profit and $455,000 as Operating Income, and $477,000 as Taxable Income in Column C. This is your taxable income before NOL & Special Deductions. Submit this worksheet with your case. If you do not have $477,000 on line 10 of your Schedule M-1, go back and review the above. You should have numbers on line 1, 2, 5b, 5c, under 5c, 6, 7, 8a, 9, and 10. Let's head back over to page 1 of the Form 1120 and start filling out lines 1 through line 28 based on Column C of your worksheet and should equal $477,000. For line 2, you will need to complete 1125-A. Since we are a service company, everything on box 9 will be blank. Fill out 1 through 8 based on your Income Statement. Don't forget about the Name and EIN on all forms. Jump to page 2 of the 1120. Premium Corporation owns 25% of another corporation's stock. Look at your Income Statement for the amount of Dividend Income. Look in Chapter 17, figure out what percentage your dividend's received deduction is. Complete Schedule C, totals carry to page 1 of 1120, lines 4 and 29b and 29c subtotal. Watch for Line 9 subtotals on Schedule C!! Be careful to carry subtotals and totals to correct lines of Sch C. Once you've updated Page 1 of the 1120, you should have Line 30 filled out with the new Taxable Income. To fill out line 31 of Page 1 (1120), we will head to page 3 (Schedule J). Line 1 of Schedule J is line 30 from page 1 x the corporate tax rate. You can find this in Chapter 17 or your lecture notes. You should have this number 4 times on Part 1 of Schedule J and be sure to follow the instructions on line 11 of Schedule J to carry it. For Part II of Schedule J, go to your Income Statement and see how much in Payments you made for Federal Taxes. This will go on line 14. From there you should have that same number 4 times on Part II and then follow the instructions on line 23 to carry it. Calculate Line 35 or 36 based on your answer. If amount due, no penalties. If Overpayment, you want all of it Credited to the next year. Finally, we will fill out the informational parts of the 1120 and other forms required. LO 5/nUS TAXATION:- TO DO- 1) We need to fill all 6 forms listed 2) Also, there is a page in the instructions that is called "book to tax difference worksheet" which should be in the last page. Columns B and C need to be filled in also. -All the forms are attached- Please follow the instructions thoroughly and then do the work.

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