Question

This assignment asks you to fill out 2019 Form 1120 and Schedule C (for dividend received deduction). It is based on the multiple-choice question pasted below. Use the current 21 percent tax rate.

This assignment asks you to fill out 2019 Form 1120 and Schedule C (for dividend received deduction). It is based on the multiple-choice question pasted below. Use the current 21 percent tax rate. [28] In the current year, Acom, Inc., had the following items of income and expense: Sales $500,000 Cost of sales 250,000 Dividends received 25,000 The dividends were received from a corporation of which Acorn owns 30%. In Acorn's current- year income tax retum, what amount should be reported as income before special deductions? A. $525,000 B. $508,750 C. $275,000 D. $250,000 The correct answer is C. A. The amount of $525,000 fails to deduct the cost of sales, B. The amount of $508,750 incorrectly takes the dividends-received deduction, and it fails to deduct cost of sales. C. Income before special deductions accounts for all items except for NOL carrybacks, capital loss carrybacks, and dividends-received deduction. Thus, income before special deductions is $275,000 ($500,000 + $25,000 - $250,000) D. The amount of $250,000 fails to include the dividends received as income

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Dollars are mentioned in blue figures: Solution: Form 11201.. U.S. Corporation Income Tax Return OMB No. 1545-0123 Form For calendar year 2019 or tax year beginning 2019, ending _ ,20 2019 Department of the Treasury Internal Revenue Service Go to www.irs.gov/Form1120 for instructions and the latest information. A Check if: Name B Employer identification number 1a Consolidated return (attach Form 851) U TYPE b Life/nonlife consoli- Number, street, and room or suite no. If a P.O. box, see instructions. Date incorporated dated return. OR . 2 Personal holding co. PRINT (attach Sch. PH) City or town, state or province, country, and ZIP or foreign postal code D Total assets (see instructions) 3 Personal service corp. (see instructions) 4 Schedule M-3 attached | E Check it: (1) Initial return (2) Final return (3) Name change (4) Address change 1a Gross receipts or sales . . . . . . . . . . . . . . . . . . 500000 b Returns and allowances . . . . . . . . . . . . . . . . . . C Balance. Subtract line 1b from line 1a . . . 500000 2 Cost of goods sold (attach Form 1125-A). . . . 250000 3 Gross profit. Subtract line 2 from line 1c. . . 250000 4 Dividends and inclusions (Schedule C, line 23). . . . . . . 25000 5 5 Interest . . . . . . . . . . . . . . . 29a Net operating loss deduction (see instructions)... b Special deductions (Schedule C, line 24) . . . . . . . . . . 16250 icome 29a 29b (a) Dividends and inclusions Page 2 (c) Special deductions (a) x (b) (b) % Form 1120 (2019) Schedule C Dividends, Inclusions, and Special Deductions (see instructions) 1 Dividends from less-than-20%-owned domestic corporations (other than debt-financed stock) . . . . . . . . . . . . . . . . . . . . . . . . 2 Dividends from 20%-or-more-owned domestic corporations (other than debt-financed stock) . . . . . . . . . . . . . . . . . . . . . . . . 25000 65 16250 23 Total dividends and inclusions. Add column (a), lines 9 through 20. Enter here and on page 1. line 4 . . . . . . . . . . . . . . . . . . . . . . 25000