Advanced Tax Partnership Tax Return

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ACCT 441 – Advanced TaxPartnership Tax ReturnWayne Company is located at 90 Fifth Avenue New York City, NY. The company is ageneral partnership using the calendar year and accrual basis for both book and taxpurposes. It engages in the development and sale of specialized self-protection armor.The employer identification number (EIN) is 99-9999999. The company formed and beganbusiness on January 1, 2019. It does not have foreign partners or other foreign dealings.The company is neither a tax shelter or a publicly traded partnership. The company hasmade no distribution other than cash and no changes in ownership have occurred duringthe current year. Diana Banner is the Tax Matters Partner. The partnership makes nospecial elections.Information on Partnership Formation:Two individuals formed the partnership on January 1, 2019: Diana Banner (2500 IslandWay, New York City, NY) and Bruce Parker (890 Arachnid Drive, New York City, NY). For a30% interest, Banner contributed $1.2 million cash. She is an active general partner whomanages the company. For a 70% interest, Parker contributed $2.32 million cash and1,000 shares of Metro Corporation stock having a FMV of $480,000 at the time ofcontribution and a basis of $96,000 when originally acquired on January 2, 2016. Parker isan active general partner who designs and develops new products. For book purposes, thecompany recorded the contribution of stock at FMV.Inventory and COGSThe company uses the periodic inventory method and prices its inventory using the lower ofFIFO cost or market. Only beginning inventory, ending inventory, and purchases should bereflected in Schedule A. No other costs or expenses are allocated to cost of goods sold.The corporation is exempt from the uniform capitalization (UNICAP) rules because averagegross income for the previous three years was less than $10 million. The followinginformation should also be included on the applicable form:
Line 9 (a)(b),(c), & (d)
Check (ii)Not applicable
(e) & (f)
No
Capital Gains and Losses:The company sold all 1,00 shares of Metro Corporation stock on July 2, 2020 for $1.44 million.The transaction was not reported on Form 1099-B.Fixed Assets and Depreciation:The company acquired the equipment on January 2, 2019 and placed it in service on thatdate. The equipment, which originally cost $1.6 million, is MACRS seven-year property.The company did not elect Sec. 179 expensing in the acquisition year and elected out ofbonus depreciation. The company claimed the following depreciation on this property:Year Book & Reg Tax Deprec.2019 $ 228,6402020 391,840On March 1, 2020 the company acquired and placed in service additional equipmentcosting $700,000. The company made the Sec.179 expensing election for the entire cost ofthis new equipment. No depreciation or expensing is reported on Schedule A.The balance sheet is follows:
January 1, 2020
December 31, 2020
Account
Debit
Credit
Debit
Credit
Cash
$ 958,900
$ 1,062,760
Accounts Receivable
756,000
840,000
Inventory
1,400,000
1,680,000
Investment in municpal bonds
50,000
50,000
Investment in corporate stock
480,000

Equipment
1,600,000
2,300,000
Accum. Depreciation –Equipment
228,640
1,320,480
Accounts payable
140,000
182,000
Notes payable (short-term)
700,000
140,000
Accrued payroll taxes
4,900
6,860
Capital account balances:
Diana Banner (30%)
1,251,408
1,285,026
Bruce Parker (70%)
2,919,952
2,998,394
Total
$ 5,244,900
$ 5,244,900
$ 5,932,760
$ 5,932,760
The book income statement is as follows:
Sales
$ 7,000,000
Returns
(350,000)
Net sales
$ 6,650,000
Beginning inventory
$ 1,400,000
Purchases
2,800,000
Ending Inventory
(1,680,000)
Cost of goods sold
$ (2,520,000)
Gross profit
$ 4,130,000
Expenses:
Depreciation
$ 1,091,840
Repairs
45,500
Insurance
49,000
Guaranteed payment (Banner)
200,000
Other salaries
980,000
Travel
28,000
Utilities
84,000
Rent Expense
210,000
Advertising
42,000
Legal and accounting fees
70,000
Charitable contributions
56,000
Payroll taxes
98,000
Business interest expense
33,600
Investment Expenses
7,200
Investment Interst Expense
4,200
Business Meals
7,000
Total expenses
$ (3,006,340)
Interest on municpal bonds
2,000
Net gain on stock sales
960,000
Dividend income
26,400
Net income
$ 2,112,060
Other information:• The company paid Banner a $200,000 guaranteed payment for her managementservices.• The company made a $56,000 cash contribution to the Boys and Girls Club onDecember 1 of the current year.• During the current year, the company made a $600,000 cash distribution to Bannerand a $1.4 million cash distribution to Parker.• The municipal bonds, acquired in 2019, are general revenue bonds, not privateequity bonds. Assume that no expenses of the company are allocable to the taxexempt interest generated from the municipal bonds.• Use book numbers for Schedule L, M-2, and Line 1 of Schedule M-1. Also use booknumbers for Item L of Schedule K-1, and check the box for Sec. 704(c) book.• The partners share liabilities, which are recourse, in the same proportion as theirownership percentages.Required:1.) Prepare the 2020 partnership tax return, include the additional schedules andforms as needed. Be sure to prepare a Schedule K-1 for each partner.2.) Prepare a schedule for each partner’s basis in his or her partnership interest.At January 1, 2020 Banner’s basis was $1,504,878 and Parker’s was$3,127,382.To Create Electronic and PDF files of tax returns:For ATX electronic file:To create the electronic file, have the return open.  Go to Returns in the upper left-hand cornerof the screen. Then select Export Return.  Please include your, and your partner’s name (ifapplicable), in the name of the file.  Choose the location where you want to save it.  Uploadthis file to the C Corporation Tax Return assignment on MyCourses.For ATX pdf file:While in the return, go to the upper left side of the screen and select Returns, then PrintReturns.  Select the forms/schedules you want to print. Then on the upper left side of the box,select Print to PDF, then Print.  Choose the location where you want to save it.  Upload thisfile to C Corporation Tax Return assignment on MyCourses.For ProConnect electronic file:You will need to give the TA access to the return through the website.  In the commentssection of the assignment submission, please note that you used intuit Proconnect.  Togive the TA access to the return, have the return open.  In the bottom left-hand corner of thescreen, go to the Settings Icon.  Select Manage & Invite Users.  In the upper right-hand cornerof the screen, click on the Add User button.  Add the TA ([email protected])as a user to the return with full access.For ProConnect pdf file:While in the return, go to the File Return tab. Select Create PDF.  Do not select options toadd a watermark.  Download PDF and save it. Upload this file to the C Corporation Tax Returnassignment on MyCourses.If ProConnect wants you to pay something to print to PDF, you will need call to ProConnect oruse the chat feature and tell them you are a student using the software through your book.  Itonly takes a few minutes to fix.

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