Question

I need to file a tax return on TaxAct Software for this S Corporation on form 1120S and the K-1, can anyone help with this? I need all the other forms needed to complete the tax return. In other words, complete tax returns with attachments. It comes from the

Pearson's Federal Taxation 2020 Comprehensive, Timothy J. Rupert; Kenneth E. Anderson book.

C:11-57 Comparison of Operating Activities. RST business entity reported the following items during the current year:

Dividends from a 25%-owned domestic corporation 19,000

Municipal bond interest received 18,000

Corporate bond interest received 29,000

Gain on land contributed by Karen* 40,000

Operating profit (excluding depreciation) 120,000

MACRS depreciation   36,000

Sec. 1245 gain (depreciation recapture)    5,000

Sec. 1231 loss 28,000

Long-term capital losses 4,000

Short-term capital losses 5,000

Charitable contributions    23,000

Investment interest expense (related to General Electric bonds) 16,000

Salary (guaranteed payment) 37,000


* Karen held the land as an investment prior to contributing it to RST business entity three years ago in ex-change for her ownership interest. When Karen contributed the land, it had a basis of $15,000 and a FMV of $40,000. RST sold the land in the current year for $55,000. RST business entity held the land as an invest-ment. Assume that Sec. 351 applied to any corporate formation transaction.

a. What is the ordinary income and separately stated items for the current year if RST elects to be an S corporation? Assume that RST has never operated as a C corporation.

Answer 1

SOLUTION:

			a.
		S Corporation
	Amount	Ord. Inc.		Sep. Stat.
Operating profit	$120,000	$120,000
Dividends	19,000			$19,000
Municipal bond interest	18,000			18,000
Corporate bond interest	29,000			29,000
Capital gain on land	40,000			40,000
Sec. 1245 gain (depr. recap.)	5,000	5,000
Sec. 1231 loss	(28,000)			(28,000)
LTCL	(4,000)			(4,000)
STCL	(5,000)			(5,000)
MACRS depreciation	(36,000)	(36,000)
Charitable contribution	(23,000)			(23,000)
Inv. interest expense	(16,000)			(16,000)
Salary	(37,000)	(37,000)
Div. rec. ded.		_______
Total before U.S. prod. act. ded.	_______	$52,000
U.S. prod. act. ded. ($47,000 x 0.09)	$ 82,000
C corporation taxable income
Tax [$7,500 + (0.25 x $8,870)]