• Prepare a 1120 U.S. Corporation Income Tax Return as J’s Auto Body, Inc.
• Complete the appropriate schedules in the 1120 and Statement 1 – Other Deductions.
• Prepare a 1065 U.S. Return of Partnership as J’s Auto Body, LLC.
• Complete the appropriate schedules in the 1065, Statement 1 – Other Deductions and the 1065 Schedule K1 for J.
J’s Auto Body (Inc., or LLC)
1122 Sesame Street
New York, NY, 10002
EIN 90-1234567
Dated incorporated January 1st, 2010
J Jameson
8701 Electric Avenue
New York, NY, 10002SSN: 123-45-6789
• J Jameson took on Fred as a partner for the LLC. Fred owns 50% of all profits, losses, and capital. You do not have to complete Part 2 K, L, or M on the 1065 Schedule K1 (there is not enough information provided).
• $4,500 salary expense is officer’s compensation for the corporation and guaranteed payment to partners for the LLC.
• $55,000 equipment is 7-year property in its 5th year of service and was placed into service in the middle of the year, thus using the half-year convention. Use the correct table from the IRS—Publication 946: How to Depreciate Property—to determine the tax deductible depreciation. Form 4562 is not required.
• J made four quarterly estimated tax payments of $800 each over the course of the year.
• In accordance with IRS instructions: “Corporations with total receipts and total assets at the end of the tax year less than $250,000 are not required to complete Schedules L, M-1, and M-2” (Internal Revenue Service, n.d.). This also applies to the LLC.
• For the 1065 Schedule K1, you will not have enough information to fill out Part 2 K, L, and M.
J’s Auto Body
Revenues:
Service Revenue 28,000
Total Revenue 28,000
Expenses:
Salary Expense 4,500
Rent Expense 1,200
Utility Expense 300
Depreciation Expense 500
Insurance Expense 100
Supply Expense 400
7,000
Net Income 21,000
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J’s Auto Body
Balance Sheet
As of April 30, 2015
Assets
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Cash 101,800
Acct Rec’able 20,000
PP In 1,100
Equipment 55,000
Accu. Dep. 500
Supplies 2,600
Total Assets 180,000
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Liabilities and Stockholders’ Equity
Liabilities:
Accounts Payable 8,000
Salary Payable 3,000
Total Liabilities 11000.00
Stockholders’ Equity:
Common Stock 150,000
Retained Earnings 19000
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Total Stockholders’ Equity 169000.00
Total Liabilities and Stockholders’ Equity 180,000
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