1. (21 points) TSK Corp. operates a cloud data storage company. Scott, the president owns 40% of the stock. In 2020, TSK Corp. had Book Net Income of $800,000.The following items were included in Book Net Income:

Dividendincome20,000

Interest income10,000

Long term capital gain8,000

Gain on property sale25,000

Federal tax expense213,000

State income tax expense50,000

Further discussion with Scott revealed the following additional information:

1. The corporation is a calendar year end and uses the accrual method of accounting.
2. The dividends were from a domestic corporation and TSK owns 10 % of this stock.
3. Interest income is from US Treasury Bonds.
4. The corporation elected installment sale reporting on the property sale. The sale occurred in December, 2020: Selling price $100,000-adjusted basis $75,000 =$25,000 gain. The Corporation will receive five annual payments of $20,000.
5. Bookexpenses included a $5000 penalty for late payment of Federal taxes, and $12,000 premiums on officer life insurance
6. Book expenses included an estimated bad debt expense of $40,000. Actual bad debt write offs during the year were $34,000.
7. Tax depreciation exceeds book depreciation by $14,000.
8. The corporation has a long term capital loss carryover of $6,000 from 2018,
9. On July 1, 2020 TSK Corporation paid a distribution of $140,000 to its shareholders. At December 31, 2019, the corporation had accumulated earnings and profits of $ 42,000.
10. Assume a 21% tax rate.

A) Based on the above information, compute TSK's 2020 US taxable income. You may use Form 1120, Schedule M-1 as a guide.

B)Based on the above information, compute TSK's earnings and profits as of December 31, 2020.

C) Briefly indicate the major differences between Form 1120Schedukes M-1 and M-3.