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Corporation Tax Return Final Federal Taxation ll UMPI, Inc

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Corporation Tax Return Final Federal Taxation ll UMPI, Inc. is a calendar-year corporation that began business on January 1, 2017. For 2018, it reported the following information in its current year audited income statement. Notes with important tax information are provided below. Required: Identify the book-to-tax adjustments for UMPI a. Reconcile book income to taxable income on worksheet (below). b. Complete UMPI’s Schedule M-1. c. Complete UMPI’s Form 1120, page 1 line 1a to line 31. Notes: 1. UMPI owns 10% of the outstanding Home Corp. (HC) stock. Home Corp. reported $2,000,000 of income for the year. UMPI accounted for its investment in HC under the equity method and it recorded its pro rata share of HC’s earnings for the year. HC also distributed a $100,000 dividend to UMPI. 2. Of the $20,000 interest income, $5,000 was from Ford Motor, $7,000 was from a Toyota, $6,000 was from a Town of Presque Isle municipal bond, and the remaining $2,000 was from an investment in a CD (certificate of deposit). 3. Life insurance proceeds from death of the CFO. 4. This includes total officer compensation of $3,500,000. The CEO was paid $1,250,000 for salary in 2018 (no one officer received more than $1,000,000 compensation). 5. $2,000 is the portion of interest paid on a loan taken out to obtain a tax exempt municipal bond from the City of Presque Isle. 6. UMPI actually wrote off $48,000 of its accounts receivable as uncollectible. 7. Tax depreciation was $700,000. 8. In the current year, UMPI made $23,500 in actual payments on warranties it provided to customers. 9. UMPI made $750,000 of cash contributions to qualified charities during the year. 10. On January 1 of this year UMPI acquired the assets of another business. In the process it acquired $200,000 of goodwill. At the end of the year, UMPI wrote off $10,000 of the goodwill as impaired. 11. UMPI expensed all of its organizational expenditures for book purposes. It expensed the maximum amount of organizational expenditures allowed for tax purposes. 12. The other expenses do not contain any items with book-tax differences. 13. UMPI received rental income payments in 2018 that relates to 2019. They have not earned the amount as of year-end and was not recorded in the books. The total amount received was $21,500. Book to Tax Worksheet: UMPI corp. Book to Tax Income statement Book Adjustments For current year Income (Dr.) Revenue from sales $47,000,000 Cost of Goods Sold (34,000,000) Gross profit $xxxxxxxxx Other income: Income from investment in HC stock 200,0001 Interest income 20,0002 Capital gains (losses) (4,000) Life insurance proceeds Miscellaneous income 315,0003 50,000 Gross Income Expenses: Compensation Interest expense Advertising (7,500,000)4 (5,000)5 (1,350,000) Repairs and Maintenance (75,000) Rent (22,000) Bad Debt expense Depreciation Warranty expenses Charitable donations (51,000)6 (1,000,000)7 (90,000)8 (750,000)9 Life insurance premiums (45,000) Meals (12,500) Goodwill impairment (10,000)10 Organizational expenditures (59,000) 11 Other expenses Total expenses Income before taxes Provision for income taxes Net Income after taxes (140,000)12 ($11,390,000) $XXXXXXX (520,000) $XXXXXX Taxable Cr. Income U.S. Corporation Income Tax Return 1120 Form Department of the Treasury Internal Revenue Service A Check if: 1a Consolidated return (attach Form 851) . b Life/nonlife consolidated return . . . 2 Personal holding co. (attach Sch. PH) . . For calendar year 2018 or tax year beginning a TYPE OR PRINT OMB No. 1545-0123 , 2018, ending , 20 Name B Employer identification number Number, street, and room or suite no. If a P.O. box, see instructions. C Date incorporated City or town, state or province, country, and ZIP or foreign postal code D Total assets (see instructions) 3 Personal service corp. (see instructions) . . 4 Schedule M-3 attached 2 3 4 Returns and allowances . . . . . . . . . . Balance. Subtract line 1b from line 1a . . . . . Cost of goods sold (attach Form 1125-A) . . . . . Gross profit. Subtract line 2 from line 1c . . . . . Dividends and inclusions (Schedule C, line 23, column (a)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1c 2 3 4 5 6 7 Interest . . Gross rents . Gross royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6 7 8 9 10 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 10 11 12 13 Total income. Add lines 3 through 10 . . . . . . . . Compensation of officers (see instructions—attach Form 1125-E) . . . . . . . . . . . . . . . . . . . . . . Salaries and wages (less employment credits) . . . . . . . . . . . . . . . . . . 11 12 13 14 15 16 Repairs and maintenance Bad debts . . . . . Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 16 17 18 19 Taxes and licenses . . Interest (see instructions) Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 18 19 20 21 22 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) . Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21 22 23 24 25 Pension, profit-sharing, etc., plans Employee benefit programs . . Reserved for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 24 25 26 Other deductions (attach statement) . . . . . . . . . . . . . . . . . . . . . 26 27 28 Total deductions. Add lines 12 through 26 . . . . . . . . . . . . . . . . . . a Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11. 29a Net operating loss deduction (see instructions) . . . . . 29a b c 30 Special deductions (Schedule C, line 24, column (c)) . . . . Add lines 29a and 29b . . . . . . . . . . . . . Taxable income. Subtract line 29c from line 28. See instructions . . . . . . . . . 29b . . . . . . . . . . . . . . . . 29c 30 31 32 33 34 35 36 Total tax (Schedule J, Part I, line 11) . . . . . . . . . . . . . . . . . 2018 net 965 tax liability paid (Schedule J, Part II, line 12) . . . . . . . . . . . Total payments, credits, and section 965 net tax liability (Schedule J, Part III, line 23) . . . Estimated tax penalty. See instructions. Check if Form 2220 is attached . . . . . . Amount owed. If line 33 is smaller than the total of lines 31, 32, and 34, enter amount owed . . . . . . . . . . . . . . . . . . 31 32 33 34 35 Overpayment. If line 33 is larger than the total of lines 31, 32, and 34, enter amount overpaid . . . . 36 37 Enter amount from line 36 you want: Credited to 2019 estimated tax a Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Address change . . . . . (4) . . . . . Name change (3) . . . . . Final return (2) . . . . . . . 1a . . a a a Refunded a 27 28 37 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. Date Signature of officer Paid Preparer Use Only Print/Type preparer’s name Preparer’s signature F F Sign Here Gross receipts or sales . Initial return . b c Deductions (See instructions for limitations on deductions.) $ E Check if: (1) . 1a Tax, Refundable Credits, and Payments 2018 Go to www.irs.gov/Form1120 for instructions and the latest information. May the IRS discuss this return with the preparer shown below? See instructions. Yes No Title Date Check if self-employed Firm’s name a Firm’s EIN Firm’s address a Phone no. For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11450Q PTIN a Form 1120 (2018) Page 6 Form 1120 (2018) Schedule L Beginning of tax year (a) (b) Balance Sheets per Books Assets Cash . . . 2a b 3 4 5 6 7 8 9 10a b 11a b 12 13a b 14 15 Trade notes and accounts receivable . Less allowance for bad debts . . . Inventories . . . . . . . . . U.S. government obligations . . . Tax-exempt securities (see instructions) Other current assets (attach statement) Loans to shareholders . . . . . Mortgage and real estate loans . . . Other investments (attach statement) . Buildings and other depreciable assets Less accumulated depreciation . . . Depletable assets . . . . . . . Less accumulated depletion . . . . Land (net of any amortization) . . . Intangible assets (amortizable only) . Less accumulated amortization . . . Other assets (attach statement) . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 17 18 19 20 21 22 Accounts payable . . . . . . . . . Mortgages, notes, bonds payable in less than 1 year Other current liabilities (attach statement) . . Loans from shareholders . . . . . . . Mortgages, notes, bonds payable in 1 year or more Other liabilities (attach statement) . . . . Capital stock: a Preferred stock . . . . b Common stock . . . . Additional paid-in capital . . . . . . . Retained earnings—Appropriated (attach statement) Retained earnings—Unappropriated . . . Adjustments to shareholders’ equity (attach statement) Less cost of treasury stock . . . . . . Total liabilities and shareholders’ equity . . 1 . . . . . . . . . End of tax year (c) (d) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Liabilities and Shareholders’ Equity 23 24 25 26 27 28 Schedule M-1 ( ) ( ) Reconciliation of Income (Loss) per Books With Income per Return Note: The corporation may be required to file Schedule M-3. See instructions. 1 Net income (loss) per books . . . . . . 2 Federal income tax per books . . . . . 3 Excess of capital losses over capital gains 4 Income subject to tax not recorded on books this year (itemize): 5 Expenses recorded on books this year not deducted on this return (itemize): Depreciation . . . . $ Charitable contributions . $ Travel and entertainment . $ a b c 6 Add lines 1 through 5 . Schedule M-2 1 2 3 4 . . . . . 7 Income recorded on books this year not included on this return (itemize): Tax-exempt interest $ 8 Deductions on this return not charged against book income this year (itemize): a Depreciation . . $ b Charitable contributions $ 9 10 Add lines 7 and 8 . . . . . . Income (page 1, line 28)—line 6 less line 9 . . . Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L) Balance at beginning of year Net income (loss) per books . Other increases (itemize): Add lines 1, 2, and 3 . . . . . . . . . . . . . . . . . . 5 6 7 8 Distributions: a Cash . . b Stock . c Property . Other decreases (itemize): . . . . . . . . . Add lines 5 and 6 . . . . . . Balance at end of year (line 4 less line 7) Form 1120 (2018)