Complete the following forms for AMI's corporate tax return for 2022:

Form 1120: U.S. Corporation Income Tax Return (all six pages)

Form 1125-A: Cost of Goods Sold

Form 4562: Depreciation and Amortization

Schedule D: Capital Gains and Losses

Facts:

Lily and Robert formed AMI in 2014. AMI sells (retail) all essential puppy products including food, toys, treats, beds, and walking gear. Lily owns 60 percent of the outstanding common stock of AMI and Robert owns the remaining 40 percent.

Officers of the corporation are as follows:

Lily is the president

Robert is the executive vice president

All officers devote 100 percent of their time to the business and all officers are U.S. citizens.

AMI uses the accrual method of accounting and has a calendar year-end.

AMI made four equal estimated tax payments of $8,750 each. Its tax liability last year was $41,000. If it has overpaid its federal tax liability, AMI would like to receive a refund.

AMI paid a dividend of $30,000 to its shareholders on December 1. AMI had sufficient earnings and profits (E&P) to absorb the distribution.

Notes:

1. AMI’s inventory-related purchases during 2022 were $360,000. It values its inventory based on cost using the FIFO inventory cost flow method. Assume the rules of §263A do not apply to AMI.

2. Of the $10,000 interest income, $3,000 was from a City of Asheville bond issued in 2016, and the remaining $7,000 was from a money market account.

3. AMI’s dividend income came from Sinclair, Inc. AMI owned 10,000 shares of the stock in Sinclair at the beginning of the year. This represented 5% percent of Sinclair’s outstanding stock.

4. On November 1, 2022, AMI sold 1,000 shares of its Sinclair stock for $25,000. It had originally purchased these shares on May 19, 2014, for $40,000. After the sale, AMI owned 3% of Sinclair.

5. AMI’s compensation is as follows:

Officer Compensation:

Lily, $250,000

Robert, $175,000

Employee Compensation: $525,000

6. AMI wrote off $25,000 in accounts receivable as uncollectible during the year.

7. Use the following information to calculate AMI’s tax depreciation expense for 2022.

a. AMI owned the following fixed assets at the beginning and end of 2022:

Building acquired for $79,170 and placed in service on January 1, 2014. (39-year nonresidential property)

Equipment acquired for $47,800 and placed in service on January 19, 2019. (7-year property

b. On October 17, 2022, the corporation acquired and placed in service a piece of equipment costing $20,000. The equipment is seven-year MACRS property for tax depreciation. The corporation is electing to expense the entire cost of the equipment under Section 179 but elected out of bonus depreciation.

8. The $5,000 interest expense was from a business loan.

9. Other expenses include $6,000 for premiums paid on term life insurance policies for which AMI is the beneficiary. The policies cover the lives Lily and Robert.

10. Meals related to the meals expense shown on AMI’s Income Statement were not provided by a restaurant and, therefore, do NOT qualify for the 100% deduction for tax purposes.

  

Transcribed Image Text:

AMI - Book Income Statement Income from Operations: Sales Sales returns and allowances Cost of goods sold Gross Profit from operations Other Income: Capital bas Dividend Income Interest income Gross Profit Expenses: 2022 $1,800,000 (5,000) (350,000) 1,445,000 (15,000) 25,000 10,000 1,465,000 Compensation Depreciation Bad debt expense Meals expense Maintenance Property taxes State income taxes 950,000 10,000 15,000 3,000 6,000 11,000 45,000 payroll taxes 44,000 rent 60,000 interest expense 5,000 advertising $2,000 legal and accounting fees 16,000 employee benefts 32,000 supplies 5,000 other expenses 27,000 Total expenses Net income before taxes federal income tax expense Net income per books (1,281,000) 184,000 (62,000) 122,000 AMI - Book Income Statement Income from Operations: Sales Sales returns and allowances Cost of goods sold Gross Profit from operations Other Income: Capital bas Dividend Income Interest income Gross Profit Expenses: 2022 $1,800,000 (5,000) (350,000) 1,445,000 (15,000) 25,000 10,000 1,465,000 Compensation Depreciation Bad debt expense Meals expense Maintenance Property taxes State income taxes 950,000 10,000 15,000 3,000 6,000 11,000 45,000 payroll taxes 44,000 rent 60,000 interest expense 5,000 advertising $2,000 legal and accounting fees 16,000 employee benefts 32,000 supplies 5,000 other expenses 27,000 Total expenses Net income before taxes federal income tax expense Net income per books (1,281,000) 184,000 (62,000) 122,000

Answer rating: 100% (QA)

To complete the corporate tax return forms for AMI for the tax year 2022 well fill out the required information based on the given facts and financial ... View the full answer