U.S. Income Tax Return for An s Corporation
On March 12, 1994, Douglas Plastics Co., which is located at 2400 Lakeview Street, Fargo, North Dakota, 58103, (312) 555-8697, filed an election under Code Sec. 1362(a) to be treated as an S corporation.
Douglas Plastics Co. was incorporated January 1, 1994, under the laws of the State of North Dakota. It is engaged in the manufacture of plastic products, principally toys (principal business activity code number 326100). Its employer identification number is 31-0031258.
In 2013, the corporation had two equal stockholders and each devoted 100% of their time to the business. There were no changes in stock own-ership during 2013, and each stockholder owned 1250 shares of the corporation. One of these stockholders, Douglas Pratt, served as president. He resides at 660 Springsteen Street, Fargo, North Dakota 58103. His social security number is 555-11-W89. The other stockholder, Kickie L. Jones, served as vice president. He resides at 425 State Street, Fargo, North Dakota, 58103. His social security number is 555-33-9876. In 2013, Mr. Pratt's compensation was $50,000 and Mr. Jones' compensation was $46,000.
The corporation hired the outside firm of ATOZ Accounting Services (EIN 21-7777777) located at 1120 Main Street in Waytogo, North Dakota, 58103, (701) 555-1120, to prepare its income tax return on the accrual basis. Dewey Fugim prepared the return. Mr. Fugim (Pre-parer Tax Identification Number P12345678) is new to the firm and Mr. Pratt is uncomfortable with him discussing the tax return with the IRS without his knowledge and decides not to give him tax return preparer permission.
Form 4562
On January 3, 2012, Douglas acquired molds and patterns at a cost of $12,000. The molds and patterns are three-year MACRS property depreciated using the 200% declining balance method and a half-year convention. Bonus depreciation was not claimed because the assets are used. No Code Sec. 179 expense deduction was taken. The 2013 depreciation deduction on the molds and patterns amounts to $5,333. A $4,000 depreciation deduction was claimed in 2012.
On June 18, 2011, used but reconditioned seven-year MACRS machinery was acquired at a cost of $138,500. Douglas elected to depreciate the machinery using the alternative depreciation method with an 11-year recovery period. No bonus depreciation was claimed and no Code Sec. 179 expense was elected for this property. The 2013 depreciation deduction on the machinery is $12,591. Accumulated depreciation at the beginning of 2013 is $18,892.
On February 11, 2013, Douglas acquired seven-year MACRS office furniture and fixtures at a cost of $4,000. Douglas elects to expense the entire amount under Code Sec. 179.
On January 2, 1997, Douglas acquired a brick storage building at a cost of $110,000. The building is depreciated using the straight-line method over a 311/2 year life. The 2013 depreciation deduction on the building amounts to $3,492. Accumulated depreciation at the beginning of 2013 is $55,729.
Form 4797
On January 30, 2013, Douglas sold machinery for $3,500. The machinery, which is 7-year MACRS property, was purchased on January 14, 2009 for $10,000 and depreciated using the 200-percent declining-balance method and a half-year convention. Accumulated depreciation was $7,323 on the date of sale.
On January 18, 2013, Douglas sold a building for $62,500. The building was acquired on January 10, 1997, at a cost of $90,000. Douglas has accumulated depreciation on the building of $45,597 at the beginning of 2013. Also, on January 18, 2013, the corporation sold the land associated with the building for $13,000. The land was acquired at a cost of $10,000.
Charitable Contributions
The following charitable contributions to 50% organizations located in Fargo, North Dakota were made by the corporation in 2013.
Community Fund, $500;
Mercy Hospital, $500;
Congregational Church, $250; and
Boy Scouts of America, $250.
Distributions
The corporation made cash distributions of $80,000 on March 12, 2013, and $120,000 on May 5, 2013. The distributions were in propor-tion to stock holdings.
From 11205 - Schedule D
The corporation sold 100 shares of Nicole Co. stock on January 16, 2013, for $7,775. Douglas Plastics Co. received a 1099-B reporting that the stock was purchased on March 12, 1997, for $9,689.
ADJUSTED TRIAL BALANCE
The following is the adjusted trial balance of Douglas Plastics Co. as of December 31, 2013
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The following is the adjusted trial balance of Douglas Plastics Co. as of December 31, 2013:
Dr.
Gross sales .............................................
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Cr.
$692,759
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Returns and allowances................
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$7,360 |
|
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Inventory adjustment'..................
|
|
6,565
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Purchases................................................
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100,650 |
|
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Factory salaries and wages............
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180,235 |
|
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Freight expense........................................
|
950 |
|
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Factory insurance........................
|
4,200 |
|
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Factory utilities .........................
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10,850 |
|
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Factory water ............................
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1,150 |
|
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Factory payroll taxes....................
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16,110 |
|
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Factory real estate taxes...............
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5,000 |
|
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Dividends received (domestic) .......
|
|
788
|
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Interest on U. S. obligations .......................
|
|
2,990
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Interest on tax-exempt state bonds
|
|
1,635
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Expense related to tax-exempt bonds
|
90 |
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Other interest 2..............................................................
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|
472
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Gross rents 3...................................................................
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4,000
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Loss on sale of stock ..................
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1,914 |
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Gain on sale of building ...............
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18,216
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Gain on sale of land ....................
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3,000
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Gain on sale of machine'....................
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|
823
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Bad debts................................................
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4,500 |
|
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Rents paid...............................................
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1,200 |
|
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Motor vehicle tax........................
|
100 |
|
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Employment taxes.......................
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11,157 |
|
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Franchise tax...........................................
|
300 |
|
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Real property tax........................
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1,680 |
|
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Charitable contributions ...............
|
1,500 |
|
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Employee health insurance costs................
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34,000 |
|
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Depreciation..............................
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25,982 |
|
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Postage..................................................
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4,683 |
|
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Office supplies...........................
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3,760 |
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Telephone.................................
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4,630 |
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Meals and entertainment (subject to 50% limitation)..........
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6,600 |
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Shareholder distributions, 3/12/13...
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80,000 |
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Shareholder distributions, 5/5/13....
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120,000 |
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Officers' salaries.........................
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96,000 |
|
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Salaries and wages of salespersons and office personnel..................
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39,446 |
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Repairs ....................................................
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3,694 |
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Interest paid..............................................
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13,620 |
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Advertising.................................
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3,500 |
|
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Pension plan contributions..............
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8,805 |
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Cash........................................................
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60,662 |
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Closing inventory.........................
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125,330 |
|
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Notes and accounts receivable...................
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19,210 |
|
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Prepaid insurance.........................
|
300 |
|
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North Dakota municipal bonds........
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30,000 |
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U.S. Series EE Bonds...................................
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24,450 |
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100S Nicole Co. Common Stock........
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9,700 |
|
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Brick storage building (acquired 1/2/97)..........
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110,000 |
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Factory equipment (acquired 6/18/11)
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138,500 |
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Molds and patterns (acquired 1/3/12) ..
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12,000 |
|
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Furniture and fixtures (acquired 2/11/13)........
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4,000 |
|
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Accumulated depreciation ..............
|
|
104,037
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Land......................................................
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4,000 |
|
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Accounts payable......................................
|
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90,749
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Short-term notes payable to banks..............
|
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10,000
|
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Accrued payroll taxes.................................
|
|
4,410
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Long-term notes payable...........................
|
|
210,000
|
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Capital stock............................................
|
|
5,000
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Accumulated adjustments account
(as of 1/1/13)5...................................................................
|
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190,734
|
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Other adjustments account
(as of 1/1/13)5...................................................................
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1,640
|
|
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$1,347,818
|
$1,347,818
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The following is a balance sheet for Douglas Plastics Co. as of December 31, 2012:
Assets
|
Cash..............................................................
|
|
$ 50,706
|
|
Notes and accounts receivable...........................
|
|
94,210
|
|
Inventories......................................................................................
|
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118,765
|
|
Prepaid insurance............................................
|
|
530
|
|
U.S. Series EE Bonds........................................
|
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10,368
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North Dakota municipal bonds...........................
|
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30,000
|
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Loans to shareholders......................................
|
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2,000
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200 shares - Nicole Co. - Common .....................
|
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19,389
|
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Buildings and other depreciable assets................
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360,500
|
|
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Less: Accumulated depreciation.........................
|
131,094
|
|
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Net depreciable assets.................................
|
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229,406
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Land.............................................................
|
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30,000
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Total assets................................................
|
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$585,374
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| Liabilities and Capital |
|
|
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Accounts payable............................................
|
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$155,905
|
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Short-term notes payable to banks.....................
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20,000
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Accrued payroll taxes.......................................
|
|
2,095
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Long-term notes.............................................
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210,000
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Capital stock..................................................
|
|
5,000
|
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Accumulated adjustments account.....................
|
|
190,734
|
|
Other adjustments account...............................
|
|
1,640
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Total liabilities and capital.............................
|
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___ $585,374
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Douglas Plastics Co. filed all other necessary information and tax returns for 2013, including Form 1096 and Form(s) 1099.