Fill all necessary information and tax returns for 2013

Reference no: EM131052774

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

The following is the adjusted trial balance of Douglas Plastics Co. as of December 31, 2013: Dr. Gross sales .............................................		Cr. $692,759
Returns and allowances................	$7,360
Inventory adjustment'..................		6,565
Purchases................................................	100,650
Factory salaries and wages............	180,235
Freight expense........................................	950
Factory insurance........................	4,200
Factory utilities .........................	10,850
Factory water ............................	1,150
Factory payroll taxes....................	16,110
Factory real estate taxes...............	5,000
Dividends received (domestic) .......		788
Interest on U. S. obligations .......................		2,990
Interest on tax-exempt state bonds		1,635
Expense related to tax-exempt bonds	90
Other interest ^{2..............................................................}		472
Gross rents ^{3...................................................................}		4,000
Loss on sale of stock ..................	1,914
Gain on sale of building ...............		18,216
Gain on sale of land ....................		3,000
Gain on sale of machine^{'....................}		823
Bad debts................................................	4,500
Rents paid...............................................	1,200
Motor vehicle tax........................	100
Employment taxes.......................	11,157
Franchise tax...........................................	300
Real property tax........................	1,680
Charitable contributions ...............	1,500
Employee health insurance costs................	34,000
Depreciation..............................	25,982
Postage..................................................	4,683
Office supplies...........................	3,760
Telephone.................................	4,630
Meals and entertainment (subject to 50% limitation)..........	6,600
Shareholder distributions, 3/12/13...	80,000
Shareholder distributions, 5/5/13....	120,000
Officers' salaries.........................	96,000
Salaries and wages of salespersons and office personnel..................	39,446
Repairs ....................................................	3,694
Interest paid..............................................	13,620
Advertising.................................	3,500
Pension plan contributions..............	8,805
Cash........................................................	60,662
Closing inventory.........................	125,330
Notes and accounts receivable...................	19,210
Prepaid insurance.........................	300
North Dakota municipal bonds........	30,000
U.S. Series EE Bonds...................................	24,450
100S Nicole Co. Common Stock........	9,700
Brick storage building (acquired 1/2/97)..........	110,000
Factory equipment (acquired 6/18/11)	138,500
Molds and patterns (acquired 1/3/12) ..	12,000
Furniture and fixtures (acquired 2/11/13)........	4,000
Accumulated depreciation ..............		104,037
Land......................................................	4,000

Accounts payable......................................		90,749
Short-term notes payable to banks..............		10,000
Accrued payroll taxes.................................		4,410
Long-term notes payable...........................		210,000
Capital stock............................................		5,000
Accumulated adjustments account (as of 1/1/13)5...................................................................		190,734
Other adjustments account (as of 1/1/13)5...................................................................		1,640
	$1,347,818	$1,347,818

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......................................................................................		118,765
Prepaid insurance............................................		530
U.S. Series EE Bonds........................................		10,368
North Dakota municipal bonds...........................		30,000
Loans to shareholders......................................		2,000
200 shares - Nicole Co. - Common .....................		19,389
Buildings and other depreciable assets................	360,500
Less: Accumulated depreciation.........................	131,094
Net depreciable assets.................................		229,406
Land.............................................................		30,000
Total assets................................................		$585,374
Liabilities and Capital
Accounts payable............................................		$155,905
Short-term notes payable to banks.....................		20,000
Accrued payroll taxes.......................................		2,095
Long-term notes.............................................		210,000
Capital stock..................................................		5,000
Accumulated adjustments account.....................		190,734
Other adjustments account...............................		1,640
Total liabilities and capital.............................		___ $585,374

Douglas Plastics Co. filed all other necessary information and tax returns for 2013, including Form 1096 and Form(s) 1099.

Reference no: EM131052774

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