Answer Happy

While James Craig and his former classmate Paul Dolittle bothstudied accounting at school, they ended up pursuing careers inprofessional cake decorating. Their company, Good to Eat (GTE),specializes in custom-sculpted cakes for weddings, birthdays, andother celebrations. James and Paul formed the business at thebeginning of 2021, and each contributed $290,000 in exchange for a50 percent ownership interest. GTE also borrowed $1,160,000 from alocal bank. Both James and Paul had to personally guarantee theloan. Both owners provide significant services for the business.The following information pertains to GTE’s 2021 activities: GTEuses the cash method of accounting (for both book and tax purposes)and reports income on a calendar-year basis. GTE received$1,650,000 of sales revenue and reported $770,000 of cost of goodssold (it did not have any ending inventory). GTE paid $150,000compensation to James, $150,000 compensation to Paul, and $160,000of compensation to other employees (assume these amounts includeapplicable payroll taxes, if any). GTE paid $39,000 of rent for abuilding and equipment, $44,000 for advertising, $81,200 ininterest expense, $6,400 for utilities, and $4,400 for supplies.GTE contributed $17,000 to charity. GTE received a $5,800 qualifieddividend from a great stock investment (it owned 2 percent of thecorporation distributing the dividend), and it recognized $3,900 inshort-term capital gain when it sold some of the stock. On December1, 2021, GTE distributed $44,000 to James and $44,000 to Paul. GTEhas qualified property of $324,000 (unadjusted basis).
a-1. Assume James and Paul formed GTE asan S corporation.
Complete GTE’s Form 1120-S, page 1; Form 1120-S, ScheduleK. Use 2021 tax rules regardless of year on taxform.
Employer identification number: 58-1111111
dules 5 eztour Module 7: Critical Thinking Part 1 of 3 n 1 L cBook n ferences html A to search e Port x Module 6 Crits X Di un.com/et/map/index.html?_con=con&external Required information Form 1120-S Department of the Treasury Internal Revenue Service For calendar year 2020 or tax year beginning A Selection effective date. B Business activity code number isee instructions) H Check it Income Question 1M X TYPE OR PRINT 9 Repairs and maintenance 10 Bad debts 11 Rents C Check if Sch. M-3 attached G is the corporation electing to be an 3 corporation beginning with this tex year? (3) Accress (2) Name change O U.S. Income Tax Return for an S Corporation Do not file this form unless the corporation has filed or is attaching Form 2553 to alect to be an 5 corporation. Go to www.irs.gov/Form1120S for instructions and the latest information. Et browser-0&launchUrl=https%253A%252F%252Flmsunheducation.com%252Fmghmiddlewaro%252Fmheprodu....@ 2 Cost of goods sold (allach Form 1125 A) 3 Grass profit. Subtract ine 2 from line to 4 Net gain (loss) from Form 4797, line 17 (attach Form 4797) 5 Other income (loss) (see instructions-attach statement) 6 Total income (loss). Add lines 3 through 51 2020, ending Name (Enter corporation name exacty as shown above.) 7 Compensations of officers (see instructions-attach Form 1125-E) 8 Salaries and wages (less employment credits) McGraw-Hill Cox Numbar, street, and room or sune no Ita PO box.see instructions 2 < Prev التالت Saved Yes City or town, state or province, country and ZIP or foreign F Total assets (see instructions) postal code (1) Final return Change ▸ I Enter the number of shareholders who were shareholders during any part of the tax year (1) Aggregated activities for section 485 at-risk (2) Grouped activities for section 469 passive activity J Check if corporation purposes purposes Caution: Include only trade or business income and expenses on lines 1a through 21. See the instructions for more information. 18 Gross recepts or sales 1a b Retums and allowances c Balance Subtract line 1b from Ineta No (4) Amended return Question 1-M X 1b 1 0 8 2 3 hatu ➤ of 3 OMB No. 1545-0130 2020 .20 https://www.wix C Get Homework x + X D Employer identification number E Date incorporated It "Yes," attach Farm 2553 f not already fied (5) S election termination on revocation 1c 2 3 4 5 6 7 7 8 9 10 11 Next > Help 76°F ^ Save & E D

7: Critical Thinking i 3 Module 5: Portlc x es html to.mheducation.com/ext/man/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fims.mheducation.com%252Fmghmiddleware%2 to search Deductions (see instructions for limitations) A Tax and Payments. Required information Module 6: Critic X Sign Here Paid Preparer mencation of ntrare reao mctrichinne attach Form 11951 10 Bad DDIS 11 Rents 12 Taxes and licenses. 13 Interest (see instructions) Question 1- Mc x 16 Advertising 17 Pension, profit-sharing, etc., plans 18 Employee benefit programs 19 Other deductions (attach statement). 14 Depreciation not claimed on Form 1125-A or elsewhere on return (attach Form 4562) 15 Depletion (Do not deduct oil and gas depletion.) 20 Total deductions. Add lines 7 through 191 21 Ordinary business income (loss). Subtract line 20 from line 6 22a Excess net passive income or LIFO recapture tax (see instructions) b Tax from Schedule D (Form 1120-S) c Add lines 22a and 22b (see instructions for additional taxes) 23a 2020 estimated tax payments and 2019 overpayment credited to 2020 b Tax deposited with Form 7004 c Credit for federal tax paid on fuels (attach Form 4136) d Refundable credit from Form 8827, line 5c Signature of officer Print/Type preparer's name Firm's name O e Add lines 23a through 23d 24 Estimated tax penalty (see instructions). Check if Form 2220 is attached 25 Amount owed. If line 23e is smaller than the total of lines 22c and 24, enter amount owed 26 Overpayment. If line 23e is larger than the total of lines 22c and 24, enter amount overpaid 27 Enter amount from line 26: Credited to 2021 estimated tax ▶ D McGraw-Hill Cor X Date Preparer's signature NE < Prev n Saved 22a 22b Title 23a 23b 23c 23d 1 1 Refunded 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 May the IRS discuss this return with the preparer shown below? See instructions. No Date S 2 3 Question 1- Mo X N ➤ hulu of 3 101 11 12 if self- employed Firm's EIN ► 13 14 ww 15 16 17 18 19 20 21 22c 23e 24 25 26 27 Yes Check PTIN https://www.wal x Next > BRING C Get H 76⁰

a ezto 1 dule 7: Critical Thinking i 21 of 3 Book 0 rences ...html Module 5: Port x ^ to search Module 5: Critic x Tax and Payments mheducation.com/ext/man/index.html?_con=con&external browser=0&launchUrl=https%253A%252F%252Flmsmheducation.com%252Fmghmiddleware%252Fm Required information Sign Here You D b Tax deposited with Form 7004 e Credit for federal tax paid on fuels (attach Form 4136) d Refundable credit from Form 8827, line 5c Question 1-Mc Signature of officer Print/Type preparer's name Firm's name e Add lines 23a through 23d 24 Estimated tax penalty fsee instructions). Check if Form 2220 is attached 0 25 Amount owed. If line 23e is smaller than the total of lines 220 and 24, enter amount owed 26 Overpayment. If line 23e is larger than the total of lines 22c and 24. enter amount overpaid 27 Enter amount from line 26: Credited to 2021 estimated tax ➤ Paid Preparer Use Only For Paperwork Reduction Act Notice, see separate instructions. Firm's address Date Preparer's signature O t McGraw-Hill Cox C Saved Refunded 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. May the IRS discuss this return with the preparer shown below? See instructions. < Prev SALB Title 23b 230 23d Date Question 1- Mox 1 2 3 UN Cat. No. 11510H THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL, ©2021 McGraw-Hill Education. < 11205 page 1 Yes Check 1120S Schedule K > of 3 hu if self- employed Firm's EIN Phone no 230 24 www 25 26 27 27 https://www.wel X No PTIN Form 1120-5 (2020) C Get Homew Next > 76°F

na Module C ☐ ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Flms.mheducation.com%252Fmghmiddleware%252Fm Module 7: Critical Thinking 20 points 1 Part 1 of 3 - W eBook References Mod.html A mere to search Module 5: Port X Required information Form 1120-S Schedule K. Form 1120-S (2020) Schedule K Income (Loss) Module 6: Critic X Deductions Credits Shareholders' Pro Rata Share Items 1 Ordinary business income (loss) (page 1, line 21) 2 Net rental real estate income (loss) (attach Form 8825) Question 1 Mox 3a Other gross rental income (loss) b Expenses from other rental activities (attach statement c Other net rental income (loss) Subtract line 30 from line 38 4 Interest income 5 Dividends a Ordinary dividends b Qualified dividends 6 Royalties 7 Net short-term capital gain (loss) (attach Schedule D (Form 1120-5)) 8a Net long-term capital gain (loss) (attach Schedule D (Form 1120-S)) b Collectibles (28%) gain (los) e Unrecaptured section 1250 gain (attach statement) 9 Net section 1231 gain (loss) (attach Form 4797) 10 Other income (loss) (see instructions) 11 Section 179 deduction (attach Form 4562) 12a Charitable contributions b Investment interest expense c Section 59(ex2) expenditures (1) Type ► d Other deductions (see instructions) e Other rental credits (see instructions) f Biofuel producer credit (attach Form 6478) g Other credits (see instructions) 14a Name of country or U.S. possession ▸ b Gross income from all sources c Gross income sourced at shareholder level -Foreign gross income sourced at corporate level O E Type Type ► Type Type ► McGraw-Hill Cox Type 13a Low-income housing credit (section 42()(5)) b Low-income housing credit (other) c Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable) d Other rental real estate credits (see instructions) < Previ 1 3a 3b n 5b Saved 8b 8c 30 12 3 (2) Amount N Question 1-Mox of 3 hulu www www Total amount 2 3c 4 5a 6 7 8a 9 10 11 12a 12b 12c(2) 12d 13a 13b 13c 13d 13e 136 13g https://www.wa Xx 14b 14c Next > Page 3 C Get Homew 76°F

ule 7: Critical Thinking i 1 Question 1- Mc xhttps://www.ww x ezto.mheducation.com/ext/map/index.html?_con-con&external browser=0&aunchUrl=https%253A%252F%252Flms.mheducation.com%252Fmghmiddleware%252Fmheps 1 of 3 ✔ Book. rences bd....html 5: Porth x -re to search Foreign Transactions Required information Alternative. Minimum Tax (AMT) Items Items Affecting Shareholder Basis Module 6 Critic X Other Information IT HINDAR Dromice crean unamann Form barni b Gross income from all sources c Gross income sourced at shareholder level -Foreign gross income sourced at corporate level d Reserved for future use e Foreign branch category. T Passive category Question 1-M X g General category h Other (attach statement) : Deductions allocated and apportioned at shareholder level I interest expense Other I Foreign branch category m Passive category n General category o Other (attach statement). -Deductions allocated and apportioned at corporate level to foreign source income k Reserved for future use -Other information p Total foreign taxes (check one) la Reduction in taxes available for credit (attach statement) r Other foreign tax information (attach statement) 15a Post-1986 depreciation adjustment b Adjusted gain or loss c Depletion (other than oil and gas) d Oil, gas, and geothermal properties-gross income e Oil, gas, and geothermal properties-deductions 1 Other AMT items (attach statement) 16a Tax-exempt interest income b Other tax-exempt income c Nondeductible expenses O McGraw Hill Cox C ▸ F Seved d Distributions (attach statement if required) (see instructions) e Repayment of loans from shareholders 17a Investment income b Investment expenses c Dividend distributions paid from accumulated earnings and profits d Other items and amounts (attach statement) 18 Income (loss) reconciliation. Combine the amounts on lines 1 through 10 in the far right column. Erim the tanult ehtran < Prev Paid E Accrued S 2 3 1 2 N of 3 hulu # 1.117 14b 14c 140 140 141 14g 14h 141 141 14k 141 14m 140 140 14p 14q 15a 15b 15c 15d 15e 15/ 16a 16b 16c 16d 160 17a 17b 17c Next > C Get Homework va 76°F F