Tax II Forms: Problem 2 - 1120S and K-1 Analysis for ABC, Inc. (2018)

This assignment provides a detailed solution to a Tax II forms problem involving the analysis of Form 1120S and Schedule K-1 for ABC, Inc., an S corporation with Alice, Bob, and Charlie as shareholders. The solution begins with the company's GAAP-based income statement, including revenues, salaries, taxes, charitable contributions, depreciation, repairs, travel, and legal expenses. Additional information is provided regarding wages paid to each shareholder, tax breakdown including a penalty, depreciation differences between book and tax, and other income items like long-term capital loss, dividend income, and interest income. The task involves adjusting the book income to arrive at ordinary business income, separately stating items like qualified dividends, interest income, and capital gains/losses. The solution would likely involve completing the relevant sections of Form 1120S and generating Schedule K-1 forms for each shareholder, allocating income, deductions, and credits based on their ownership percentages, considering passive vs. non-passive income, and addressing alternative minimum tax (AMT) implications. Desklib provides this document as a resource for students studying corporate taxation and S corporations.

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DO NOT FILE
August 20, 2018
DRAFT AS OF
671117
Final K-1 Amended K-1 OMB No. 1545-0123
Schedule K-1
(Form 1120S) 2018
Department of the Treasury
Internal Revenue Service For calendar year 2018, or tax year
beginning / / 2018 / /ending
Shareholder’s Share of Income, Deductions,
Credits, etc. ▶ See back of form and separate instructions.
Information About the CorporationPart I
A Corporation’s employer identification number
B Corporation’s name, address, city, state, and ZIP code
C IRS Center where corporation filed return
Information About the ShareholderPart II
D Shareholder’s identifying number
E Shareholder’s name, address, city, state, and ZIP code
F Shareholder’s percentage of stock
ownership for tax year. . . . . . . %
For IRS Use Only
Shareholder’s Share of Current Year Income,
Deductions, Credits, and Other Items
Part III
1 Ordinary business income (loss)
2 Net rental real estate income (loss)
3 Other net rental income (loss)
4 Interest income
5a Ordinary dividends
5b Qualified dividends
6 Royalties
7 Net short-term capital gain (loss)
8a Net long-term capital gain (loss)
8b Collectibles (28%) gain (loss)
8c Unrecaptured section 1250 gain
9 Net section 1231 gain (loss)
10 Other income (loss)
11 Section 179 deduction
12 Other deductions
13 Credits
14 Foreign transactions
15 Alternative minimum tax (AMT) items
16 Items affecting shareholder basis
17 Other information
* See attached statement for additional information.
For Paperwork Reduction Act Notice, see the Instructions for Form 1120S.www.irs.gov/Form1120S Cat. No. 11520D Schedule K-1 (Form 1120S) 2018

DO NOT FILE
August 20, 2018
DRAFT AS OF
Schedule K-1 (Form 1120S) 2018 Page 2
This list identifies the codes used on Schedule K-1 for all shareholders and provides summarized reporting information for shareholders who
For detailed reporting and filing information, see the separate Shareholder’s Instructions for Schedule K-1 and the instructions for your inco
1. Ordinary business income (loss). Determine whether the income (loss) is
passive or nonpassive and enter on your return as follows:
Report on
Passive loss See the Shareholder’s Instructions
Passive income Schedule E, line 28, column (h)
Nonpassive loss See the Shareholder’s Instructions
Nonpassive income Schedule E, line 28, column (k)
2. Net rental real estate income (loss)See the Shareholder’s Instructions
3. Other net rental income (loss)
Net income Schedule E, line 28, column (h)
Net loss See the Shareholder’s Instructions
4. Interest income Form 1040, line 2b
5a. Ordinary dividends Form 1040, line 3b
5b. Qualified dividends Form 1040, line 3a
6. Royalties Schedule E, line 4
7. Net short-term capital gain (loss)Schedule D, line 5
8a. Net long-term capital gain (loss)Schedule D, line 12
8b. Collectibles (28%) gain (loss) 28% Rate Gain Worksheet, line 4
(Schedule D instructions)
8c. Unrecaptured section 1250 gainSee the Shareholder’s Instructions
9. Net section 1231 gain (loss) See the Shareholder’s Instructions
10. Other income (loss)
Code
A Other portfolio income (loss) See the Shareholder’s Instructions
B Involuntary conversions See the Shareholder’s Instructions
C Sec. 1256 contracts & straddles Form 6781, line 1
D Mining exploration costs recaptureSee Pub. 535
Section 951A incomeE
Section 965(a) inclusionF
G Subpart F income other than
sections 951A and 965 inclusion
H Other income (loss) }See the Shareholder’s Instructions
11. Section 179 deduction See the Shareholder’s Instructions
12. Other deductions
A Cash contributions (60%)
B Cash contributions (30%)
C Noncash contributions (50%)
D Noncash contributions (30%)
E Capital gain property to a 50%
organization (30%)
F Capital gain property (20%)
G Contributions (100%)
}See the Shareholder’s Instructions
H Investment interest expense Form 4952, line 1
I Deductions—royalty income Schedule E, line 19
J Section 59(e)(2) expenditures See the Shareholder’s Instructions
K Section 965(c) deduction See the Shareholder’s Instructions
L Deductions—portfolio (other) Schedule A, line 16
M Preproductive period expenses See the Shareholder’s Instructions
N Commercial revitalization deduction
from rental real estate activities See Form 8582 instructions
O Reforestation expense deductionSee the Shareholder’s Instructions
P through R Reserved for future use
S Other deductions See the Shareholder’s Instructions
13. Credits
A Low-income housing credit (section
42(j)(5)) from pre-2008 buildings
B Low-income housing credit (other)
from pre-2008 buildings
C Low-income housing credit (section
42(j)(5)) from post-2007 buildings
D Low-income housing credit (other)
from post-2007 buildings
E Qualified rehabilitation expenditures
(rental real estate)
F Other rental real estate credits
G Other rental credits
}See the Shareholder’s
Instructions
H Undistributed capital gains credit Schedule 5 (Form 1040), line 74, box a
I Biofuel producer credit
J Work opportunity credit
K Disabled access credit
L Empowerment zone employment credit
M Credit for increasing research
activities
N Credit for employer social security
and Medicare taxes
}See the Shareholder’s
Instructions
Code Report on
O Backup withholding See the Shareholder’s Instructions
P Other credits See the Shareholder’s Instructions
14. Foreign transactions
A Name of country or U.S.
possession
B Gross income from all sources
C Gross income sourced at
shareholder level
}Form 1116, Part I
Foreign gross income sourced at corporate level
D Section 951A category
E Foreign branch category
F Passive category
G General category
H Other
}Form 1116, Part I
Deductions allocated and apportioned at shareholder level
I Interest expense Form 1116, Part I
J Other Form 1116, Part I
Deductions allocated and apportioned at corporate level to foreign source
income
Section 951A categoryK
Foreign branch categoryL
M Passive category
N General category
O Other
}Form 1116, Part I
Other information
P Total foreign taxes paid Form 1116, Part II
Q Total foreign taxes accrued Form 1116, Part II
R Reduction in taxes available for
credit Form 1116, line 12
S Foreign trading gross receipts Form 8873
T Extraterritorial income exclusion Form 8873
U Section 965 information See the Shareholder’s Instructions
V Other foreign transactions See the Shareholder’s Instructions
15. Alternative minimum tax (AMT) items
A Post-1986 depreciation adjustment
B Adjusted gain or loss
C Depletion (other than oil & gas)
D Oil, gas, & geothermal—gross income
E Oil, gas, & geothermal—deductions
F Other AMT items
}See the Shareholder’s Instructions
and the Instructions for Form 6251
16. Items affecting shareholder basis
A Tax-exempt interest income Form 1040, line 2a
B Other tax-exempt income
C Nondeductible expenses
D Distributions
E Repayment of loans from
shareholders }See the Shareholder’s Instructions
17. Other information
A Investment income Form 4952, line 4a
B Investment expenses Form 4952, line 5
C Qualified rehabilitation expenditures
(other than rental real estate) See the Shareholder’s Instructions
D Basis of energy property See the Shareholder’s Instructions
E Recapture of low-income housing
credit (section 42(j)(5)) Form 8611, line 8
F Recapture of low-income housing
credit (other) Form 8611, line 8
G Recapture of investment credit See Form 4255
H Recapture of other credits See the Shareholder’s Instructions
I Look-back interest—completed
long-term contracts See Form 8697
J Look-back interest—income
forecast method See Form 8866
K Dispositions of property with
section 179 deductions
L Recapture of section 179 deduction
M through U
V Section 199A income
W Section 199A W-2 wages
X Section 199A unadjusted basis
Y Section 199A REIT dividends
Z Section 199A PTP income
AA Excess taxable income
AB Excess business interest income
AC Other information
See the Shareholder’s Instructions
}