Examining and Using Financial Statements to Identify Issues · 2018. 1. 4. · » No Balance Sheet » Cash » Accounts Receivable, Accounts Payable, Inventory, Other Assets and Other

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Examining and Using Financial Statements to

Identify IssuesIllinois State Bar Association

Family Law Update 2017: A French Quarter FestivalMarch 9th, 2017

Disclaimer» Views expressed in this presentation, both printed and verbal, do not

necessarily reflect the professional opinions or positions that thepresenters would take in an actual business appraisal or incomeanalysis assignment, or in providing business appraisal or incomeanalysis services in connection with an actual assignment. Businessappraisal and income analysis services are necessarily fact-sensitive, particularly in a litigation context.

» Nothing contained in these written materials, or as orally expressedin the related presentation, shall be construed to constitute therendering of appraisal, accounting or legal advice; the rendering ofan appraisal opinion; the rendering of an opinion as to the proprietyof taking a particular appraisal position; or the rendering of any otherprofessional opinion or service.

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Presenters / Panel

» Hon. Kevin T. Busch, Sixteenth Judicial Circuit, Kane County

» Lisa M. Nyuli, Esq., Ariano, Hardy, Ritt, Nyuli, Richmond, Lytle & Goettel, P.C., South Elgin, IL

» Rory Weiler, Esq., Weiler & Lengle, P.C., St. Charles, IL

» James M. Godbout, Sikich LLP, Chicago, IL

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Outline

» Basics of Entities

» Is it worth it to do a Business Valuation?

» Finding Income and how companies try to “tank” it

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Basics of Entities

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Basics of Entities» Sole proprietorship

» Form Schedule C

» C corporation» Form 1120

» S corporation» Form 1120S

» LLC (Limited Liability Corporation)» Form 1120S or Form 1065

» Partnership» Form 1065

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Is it worth it to do a Business Valuation?

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Questionnaire» Things to consider to assist in the determination as to if a Business

Valuation should be completed» Corporate structure» Type of business» Products and/or services» Revenue drivers» Details on customer base, workforce and marketing activities» Frequency of stock transactions» Compensation of owners and workforce» Location» Equipment

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Is it worth it to do a Business Valuation?» Quick Look

» Limited Scope for Settlement Purposes

» Complete valuation» Forensic accounting

» Value = Personal Income, Monetary Asset or Both

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Documentation Needs» Schedule C» No Balance Sheet» Cash» Accounts Receivable, Accounts Payable, Inventory, Other

Assets and Other Liabilities» S or C Corporation» Tax Returns» Financial Statements» General Ledgers

» Forensic Accounting / Cash Flow Analysis» General Ledgers» Adjusting Journal Entries» Bank and credit card statements, cancelled checks, deposit

detail

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Is it worth it to do a Business Valuation?» Custom Designs» Husband and Wife own business – 50/50» She is a designer» She comes up with new designs every year» Some residual revenue from old designs» Husband values business based on an internet program for

$750,000» Owners’ Compensation» Personal Goodwill

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Custom DesignsHistorical Balance Sheets

12/31/2013 % 12/31/2014 % 12/31/2015 % 12/31/2016 %

ASSETS:

Current Assets:1 Cash 69,503$ 82.3% 102,178$ 91.3% 211,832$ 93.0% 129,012$ 84.4%

2 Total Current Assets 69,503 82.3% 102,178 91.3% 211,832 93.0% 129,012 84.4%

Fixed Assets:3 Fixed Assets at Cost 33,622 39.8% 37,252 33.3% 53,438 23.5% 67,197 43.9%4 Accumulated Depreciation (18,720) -22.2% (27,520) -24.6% (37,593) -16.5% (43,281) -28.3%

5 Total Net Fixed Assets 14,902 17.7% 9,732 8.7% 15,845 7.0% 23,916 15.6%

6 Total Other Assets - 0.0% - 0.0% - 0.0% - 0.0%

7 Total Assets 84,405$ 100.0% 111,910$ 100.0% 227,677$ 100.0% 152,928$ 100.0%

LIABILITIES AND EQUITY:

Current Liabilities:8 Deposits - 0.0% - 0.0% - 0.0% 2,975 1.9%9 Credit Card Lines 13,130 15.6% 27,467 24.5% 79,082 34.7% 89,793 58.7%

10 Other Liabilites - 0.0% (329) -0.3% (2,303) -1.0% (2,303) -1.5%

11 Total Liabilities 13,130 15.6% 27,138 24.2% 76,779 33.7% 90,465 59.2%

12 Total Equity 71,275 84.4% 84,772 75.8% 150,898 66.3% 62,463 40.8%

13 Total Liabilities and Equity 84,405$ 100.0% 111,910$ 100.0% 227,677$ 100.0% 152,928$ 100.0%

Source(s):

U.S. Return of Partnership Income (Form 1065).

As of

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Custom DesignsHistorical Income Statements

12/31/2013 % 12/31/2014 % 12/31/2015 % 12/31/2016 %

1 Total Revenues 427,248$ 100.0% 572,761$ 100.0% 740,701$ 100.0% 488,642$ 100.0%

2 Total Cost of Revenues 146,994 34.4% 203,397 35.5% 234,572 31.7% 194,816 39.9%

3 Gross Profit 280,254 65.6% 369,364 64.5% 506,129 68.3% 293,826 60.1%

Operating Expenses4 Owner/Officer Compensation - 0.0% - 0.0% - 0.0% - 0.0%5 Partners' Medical and Insurance 17,598 4.1% 6,270 1.1% 25,029 3.4% 25,182 5.2%6 Rent 8,775 2.1% 11,700 2.0% 10,651 1.4% 10,775 2.2%7 Advertising 7,527 1.8% 24,569 4.3% 23,630 3.2% 16,988 3.5%8 Automobile and Truck Expenses 6,600 1.5% - 0.0% 4,229 0.6% 4,084 0.8%9 Computer 4,993 1.2% 9,277 1.6% 4,870 0.7% 302 0.1%

10 Legal and Professional 4,122 1.0% 13,028 2.3% 11,293 1.5% 1,590 0.3%11 Meals and Entertainment 1,863 0.4% 3,245 0.6% 1,861 0.3% 1,542 0.3%12 Telephone 4,367 1.0% 4,147 0.7% 4,502 0.6% 5,221 1.1%13 Travel 2,287 0.5% 6,737 1.2% 5,687 0.8% 164 0.0%14 Other Operating Expenses 9,228 2.2% 10,812 1.9% 23,078 3.1% 16,880 3.5%

15 Total Operating Expenses 67,360 15.8% 89,785 15.7% 114,830 15.5% 82,728 16.9%

16 Depreciation 5,575 1.3% 8,800 1.5% 10,073 1.4% 5,688 1.2%

17 Income from Operations 207,319 48.5% 270,779 47.3% 381,226 51.5% 205,410 42.0%

18 Total Other (Income)/Expense 31 0.0% 122 0.0% - 0.0% - 0.0%

19 Income Before Taxes 207,288 48.5% 270,657 47.3% 381,226 51.5% 205,410 42.0%20 Income Tax Expense - 0.0% - 0.0% - 0.0% - 0.0%

21 Net Income 207,288$ 48.5% 270,657$ 47.3% 381,226$ 51.5% 205,410$ 42.0%

Source(s):


Fiscal Year Ended

Is it worth it to do a Business Valuation?» Direct Marketing» Husband is a 50% owner in a direct marketing business» One customer represents 40% of total revenue » Owners’ Compensation» Shareholder Distributions» Remaining profit / cash flow» Adjusted book value?

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Direct MarketingHistorical Balance Sheets

12/31/2012 % 12/31/2013 % 12/31/2014 % 12/31/2015 % 12/31/2016 %

ASSETS:

Current Assets:1 Cash and Cash Equivalents 220,573$ 53.8% 199,414$ 77.9% 191,866$ 72.6% 197,397$ 57.5% 213,429$ 44.4%2 Accounts Receivable - Trade 187,557 45.8% 48,269 18.9% 70,201 26.6% 145,789 42.5% 267,652 55.6%3 Inventories 1,825 0.4% 8,225 3.2% 2,220 0.8% - 0.0% - 0.0%

4 Total Current Assets 409,955 100.0% 255,908 100.0% 264,287 100.0% 343,186 100.0% 481,081 100.0%

Fixed Assets:5 Furniture and Equipment 143,459 35.0% 160,512 62.7% 164,945 62.4% 170,101 49.6% 198,087 41.2%6 Software - 0.0% - 0.0% 5,439 2.1% 7,636 2.2% 10,268 2.1%7 Accumulated Depreciation (143,459) -35.0% (160,512) -62.7% (170,384) -64.5% (177,737) -51.8% (208,355) -43.3%

8 Total Net Fixed Assets - 0.0% - 0.0% - 0.0% - 0.0% - 0.0%

9 Total Assets 409,955$ 100.0% 255,908$ 100.0% 264,287$ 100.0% 343,186$ 100.0% 481,081$ 100.0%


Current Liabilities:10 Accounts Payable 389,085$ 94.9% 215,551$ 84.2% 215,295$ 81.5% 248,828$ 72.5% 370,552$ 77.0%11 Accrued Expenses - Salaries and Wages - 0.0% - 0.0% - 0.0% 224 0.1% 16,329 3.4%12 Accrued Expenses - Other 2,481 0.6% - 0.0% - 0.0% - 0.0% - 0.0%13 Accrued Expenses - Income Taxes 6,786 1.7% 20,574 8.0% 5,781 2.2% 8,975 2.6% 10,099 2.1%

14 Total Liabilities 398,352 97.2% 236,125 92.3% 221,076 83.6% 258,027 75.2% 396,980 82.5%

15 Total Equity 11,603 2.8% 19,783 7.7% 43,211 16.4% 85,159 24.8% 84,101 17.5%

16 Total Liabilities and Equity 409,955$ 100.0% 255,908$ 100.0% 264,287$ 100.0% 343,186$ 100.0% 481,081$ 100.0%

Source(s):


As of

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Direct MarketingHistorical Income Statements

12/31/2012 % 12/31/2013 % 12/31/2014 % 12/31/2015 % 12/31/2016 %

1 Total Revenues 2,718,853$ 100.0% 2,488,926$ 100.0% 1,531,954$ 100.0% 1,945,899$ 100.0% 2,262,189$ 100.0%

2 Total Cost of Revenues 1,650,048 60.7% 1,155,975 46.4% 669,039 43.7% 947,831 48.7% 1,045,723 46.2%

3 Gross Profit 1,068,805 39.3% 1,332,951 53.6% 862,915 56.3% 998,068 51.3% 1,216,466 53.8%

Operating Expenses4 Officers' Salaries 143,750 5.3% 178,516 7.2% 195,365 12.8% 174,824 9.0% 201,127 8.9%5 Salaries and Wages 197,508 7.3% 202,083 8.1% 187,083 12.2% 201,663 10.4% 179,501 7.9%6 Auto Expense 45,514 1.7% 32,275 1.3% 23,529 1.5% 18,748 1.0% 15,152 0.7%7 Meals and Entertainment 25,077 0.9% 24,576 1.0% 20,718 1.4% 19,114 1.0% 16,368 0.7%8 Insurance 325 0.0% 11,696 0.5% 16,937 1.1% 21,192 1.1% 26,098 1.2%9 Rent 39,563 1.5% 37,675 1.5% 37,849 2.5% 36,731 1.9% 37,718 1.7%

10 Travel 20,419 0.8% 10,659 0.4% 2,734 0.2% 9,381 0.5% 11,547 0.5%11 Other Operating Expenses 153,069 5.6% 147,057 5.9% 90,888 5.9% 67,584 3.5% 88,825 3.9%

12 Total Operating Expenses 625,225 23.0% 644,537 25.9% 575,103 37.5% 549,237 28.2% 576,336 25.5%

13 Depreciation 24,918 0.9% 17,053 0.7% 9,871 0.6% 7,353 0.4% 30,618 1.4%

14 Income from Operations 418,662 15.4% 671,361 27.0% 277,941 18.1% 441,478 22.7% 609,512 26.9%

15 Total Other (Income)/Expense 649 0.0% (3,619) -0.1% 4,013 0.3% 6,530 0.3% 9,170 0.4%

16 Income Before Taxes 418,013 15.4% 674,980 27.1% 273,928 17.9% 434,948 22.4% 600,342 26.5%17 Income Tax Expense - 0.0% - 0.0% - 0.0% - 0.0% - 0.0%

18 Net Income 418,013$ 15.4% 674,980$ 27.1% 273,928$ 17.9% 434,948$ 22.4% 600,342$ 26.5%

Source(s):


Fiscal Year Ended

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Is it worth it to do a Business Valuation?» Trees R Us» Husband / Wife are 50/50 owners» Both do actual work for company and fairly compensated

» Company specializes in tree removal, landscaping and mulch» Commercial property owned 50/50 by owners leased to business» Husband offers wife $2 million for her interests along with her

waiving maintenance and terminating her employment

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Trees R UsHistorical Balance Sheets

12/31/2012 % 12/31/2013 % 12/31/2014 % 12/31/2015 % 12/31/2016 %

ASSETS:

Current Assets:1 Cash and Cash Equivalents 15,784$ 0.4% 117,583$ 3.5% 277,784$ 7.5% 124,389$ 3.3% 113,748$ 3.0%2 Accounts Receivable 1,866,762 49.6% 1,407,444 42.1% 1,086,199 29.5% 1,615,127 42.4% 1,070,809 28.7%3 Due from Affiliates 370,118 9.8% 533,637 16.0% 579,202 15.7% 549,202 14.4% 559,202 15.0%4 Other Current Assets 1,000 0.0% 44,456 1.3% 33,294 0.9% 5,280 0.1% 108,622 2.9%

5 Total Current Assets 2,253,664 59.9% 2,103,120 63.0% 1,976,479 53.7% 2,293,998 60.2% 1,852,381 49.6%

6 Total Net Fixed Assets 1,510,660 40.1% 1,179,664 35.3% 1,554,345 42.2% 1,336,915 35.1% 1,625,990 43.6%

Other Assets:7 Cash Surrender Value of Life Ins. - 0.0% 56,654 1.7% 152,128 4.1% 180,432 4.7% 254,401 6.8%

8 Total Other Assets - 0.0% 56,654 1.7% 152,128 4.1% 180,432 4.7% 254,401 6.8%

9 Total Assets 3,764,324$ 100.0% 3,339,438$ 100.0% 3,682,952$ 100.0% 3,811,345$ 100.0% 3,732,772$ 100.0%


Current Liabilities:10 Accounts Payable 142,954$ 3.8% 211,850$ 6.3% 101,900$ 2.8% 219,519$ 5.8% 80,516$ 2.2%11 Current Portion of Long Term Debt 639,718 17.0% 524,745 15.7% 695,922 18.9% 388,915 10.2% 285,371 7.6%12 Line of Credit 514,401 13.7% 256,389 7.7% 600,886 16.3% 762,373 20.0% 500,000 13.4%13 Other Current Liabilities 361,451 9.6% 130,562 3.9% 175,010 4.8% 262,982 6.9% 120,601 3.2%

14 Total Current Liabilities 1,658,524 44.1% 1,123,546 33.6% 1,573,718 42.7% 1,633,789 42.9% 986,488 26.4%

Long-Term Liabilities:15 Long Term Debt 1,087,802 28.9% 791,626 23.7% 830,388 22.5% 438,605 11.5% 697,333 18.7%

16 Total Liabilities 2,746,326 73.0% 1,915,172 57.4% 2,404,106 65.3% 2,072,394 54.4% 1,683,821 45.1%

17 Total Equity 1,017,998 27.0% 1,424,266 42.6% 1,278,846 34.7% 1,738,951 45.6% 2,048,951 54.9%

18 Total Liabilities and Equity 3,764,324$ 100.0% 3,339,438$ 100.0% 3,682,952$ 100.0% 3,811,345$ 100.0% 3,732,772$ 100.0%

Source(s):

Compiled financial statements.

As of

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Trees R UsHistorical Income Statements

12/31/2012 % 12/31/2013 % 12/31/2014 % 12/31/2015 % 12/31/2016 %

1 Total Revenues 11,199,033$ 100.0% 10,457,409$ 100.0% 9,956,070$ 100.0% 11,786,820$ 100.0% 10,266,025$ 100.0%

2 Total Cost of Revenues 8,107,921 72.4% 7,324,619 70.0% 6,610,122 66.4% 7,292,781 61.9% 6,235,332 60.7%

3 Gross Profit 3,091,112 27.6% 3,132,790 30.0% 3,345,948 33.6% 4,494,039 38.1% 4,030,693 39.3%

Operating Expenses4 Owner/Officer Compensation 218,400 2.0% 231,022 2.2% 293,157 2.9% 565,854 4.8% 560,455 5.5%5 Salaries and Wages 1,150,706 10.3% 1,311,859 12.5% 1,771,878 17.8% 2,080,433 17.7% 2,002,493 19.5%6 Insurance Expense 179,897 1.6% 119,515 1.1% 255,485 2.6% 245,474 2.1% 238,225 2.3%7 Rent 507,853 4.5% 531,030 5.1% 518,017 5.2% 518,500 4.4% 527,000 5.1%8 Legal and Professional Expense 53,865 0.5% 132,858 1.3% 90,331 0.9% 70,718 0.6% 24,100 0.2%9 General and Administrative Expenses 573,636 5.1% 530,357 5.1% 471,781 4.7% 454,441 3.9% 414,671 4.0%

10 Total Operating Expenses 2,684,357 24.0% 2,856,641 27.3% 3,400,649 34.2% 3,935,420 33.4% 3,766,944 36.7%

11 Income from Operations 406,755 3.6% 276,149 2.6% (54,701) -0.5% 558,619 4.7% 263,749 2.6%

12 Total Other (Income)/Expense (158,758) -1.4% (130,648) -1.2% 830 0.0% 82,014 0.7% (49,486) -0.5%

13 Income Before Taxes 565,513 5.0% 406,797 3.9% (55,531) -0.6% 476,605 4.0% 313,235 3.1%14 Income Tax Expense - 0.0% 529 0.0% - 0.0% - 0.0% 3,235 0.0%

15 Net Income 565,513$ 5.0% 406,268$ 3.9% (55,531)$ -0.6% 476,605$ 4.0% 310,000$ 3.0%

16 EBITDA 1,391,687$ 12.4% 1,055,067$ 10.1% 408,437$ 4.1% 974,538$ 8.3% 759,241$ 7.4%

Source(s):

Compiled financial statements.

Fiscal Year Ended

Is it worth it to do a Business Valuation?» Size Matters» Cost versus Value» Rebuttal Reports

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Cash Flow 100,000$ 100,000$ 900,000$ 900,000$

Capitalization Rate 20% 18% 20% 18%

Value 500,000$ 555,556$ 4,500,000$ 5,000,000$

Value Difference 55,556$ 500,000$

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Finding Income and how companies try to “tank” it?

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Finding Income and how companies try to “tank” it» Distributions – cash flow to owners» Personal Expenses paid by business» Capital Expenditures» Repairs and Maintenance» New bookkeeper» Ghost payroll» Reduction in liabilities, less reliance on bank financing» Wind down threat vs. bankruptcy

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Finding income and how companies try to “tank” it

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IRMO SmithHistorical Income Analysis

Normal Year Down YearTax-Basis Cash Flow Tax-Basis Cash Flow

Income1 Wages, Salaries, Tips, etc. 100,000$ 100,000$ 75,000$ 75,000$ 2 S-Corp, Rental Real Estate, Partnerships, etc. 150,000 125,000 (25,000) 50,000 3 Total Adjusted Pre-Tax Gross Income / Cash Flow 250,000$ 225,000$ 50,000$ 125,000$

Finding income and how companies try to “tank” it» Construction Company» Husband owns 33.4%» Son and third party each own 33.3%

» Wife worked in business prior to divorce» Capital Expenditures (Fixed Assets)» New bookkeeper» Costs of Revenue or COGS» Other Expenses

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Construction CompanyHistorical Balance Sheets

12/31/2012 % 12/31/2013 % 12/31/2014 % 12/31/2015 % 12/31/2016 %

ASSETS:

Current Assets:1 Cash and Cash Equivalents 129,794$ 13.4% 162,824$ 15.9% 191,372$ 18.1% 75,910$ 9.9% 293,510$ 31.1%2 Misc. Recv. MRC Madison St. 41,217 4.3% 41,217 4.0% - 0.0% - 0.0% - 0.0%3 Other Misc. Receivables 20,000 2.1% - 0.0% - 0.0% - 0.0% - 0.0%4 Employee Receivable 3,000 0.3% - 0.0% 600 0.1% - 0.0% - 0.0%

5 Total Current Assets 194,012 20.1% 204,042 19.9% 191,972 18.1% 75,910 9.9% 293,510 31.1%

Fixed Assets:6 Land at Cost 67,056 6.9% 67,056 6.5% 67,056 6.3% 67,056 8.7% 67,056 7.1%7 Fixed Assets at Cost 2,100,726 217.1% 2,241,940 218.8% 2,267,293 213.8% 2,434,188 316.6% 2,476,760 262.8%8 Accumulated Depreciation (1,449,208) -149.8% (1,634,982) -159.6% (1,687,899) -159.2% (1,937,708) -252.0% (2,071,788) -219.8%

9 Total Net Fixed Assets 718,574 74.3% 674,014 65.8% 646,450 61.0% 563,536 73.3% 472,028 50.1%

10 Total Other Assets 54,836 5.7% 146,636 14.3% 221,808 20.9% 129,343 16.8% 177,015 18.8%

11 Total Assets 967,421$ 100.0% 1,024,692$ 100.0% 1,060,230$ 100.0% 768,789$ 100.0% 942,553$ 100.0%


Current Liabilities:12 Current Portion of Long Term Debt 315,870$ 32.7% 224,739$ 21.9% 204,739$ 19.3% 146,145$ 19.0% 160,417$ 17.0%

13 Total Current Liabilities 315,871 32.7% 224,739 21.9% 204,739 19.3% 146,145 19.0% 160,417 17.0%

Long-Term Liabilities:14 Long Term Debt 467,794 48.4% 531,860 51.9% 463,432 43.7% 378,866 49.3% 277,199 29.4%15 N/P Shareholder - 0.0% 20,000 2.0% 20,000 1.9% 20,000 2.6% 20,000 2.1%

16 Total Liabilities 783,665 81.0% 776,599 75.8% 688,171 64.9% 545,011 70.9% 457,616 48.6%

17 Total Equity 183,756 19.0% 248,094 24.2% 372,059 35.1% 223,778 29.1% 484,937 51.4%

18 Total Liabilities and Equity 967,421$ 100.0% 1,024,693$ 100.0% 1,060,230$ 100.0% 768,789$ 100.0% 942,553$ 100.0%

Source(s):

As of

Federal income tax returns (Form 1120S)

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Construction CompanyHistorical Income Statements

12/31/2012 % 12/31/2013 % 12/31/2014 % 12/31/2015 % 12/31/2016 %

1 Total Revenues 2,724,759 100.0% 2,261,802 100.0% 2,431,417 100.0% 2,702,083 100.0% 3,187,140 100.0%

2 Total Cost of Revenues 751,258 27.6% 376,223 16.6% 591,623 24.3% 799,126 29.6% 909,975 28.6%

3 Gross Profit 1,973,501 72.4% 1,885,579 83.4% 1,839,794 75.7% 1,902,957 70.4% 2,277,165 71.4%

Operating Expenses4 Owner/Officer Compensation 136,000 5.0% 144,018 6.4% 136,000 5.6% 136,000 5.0% 136,000 4.3%5 Salaries and Wages 460,356 16.9% 542,351 24.0% 505,897 20.8% 685,332 25.4% 892,791 28.0%6 Travel and Entertainment 16,620 0.6% 13,891 0.6% 8,227 0.3% 21,051 0.8% 11,789 0.4%7 Professional Services 109,501 4.0% 73,426 3.2% 43,019 1.8% 28,955 1.1% 22,795 0.7%8 Taxes and Licenses 100,585 3.7% 100,229 4.4% 109,232 4.5% 130,277 4.8% 94,364 3.0%9 Repairs and Maintenance 183,639 6.7% 179,468 7.9% 228,552 9.4% 275,033 10.2% 219,613 6.9%

10 Rents 102,234 3.8% 101,701 4.5% 90,408 3.7% 48,868 1.8% 54,884 1.7%11 Auto and Truck Expense 176,573 6.5% 156,712 6.9% 171,454 7.1% - 0.0% - 0.0%12 Insurance 88,538 3.2% 124,115 5.5% 97,246 4.0% 120,125 4.4% 111,491 3.5%13 Union Dues 73,679 2.7% 69,461 3.1% 88,843 3.7% 134,919 5.0% 126,009 4.0%14 Supplies 23,914 0.9% 17,623 0.8% 47,091 1.9% 49,859 1.8% 40,285 1.3%15 Office Expenses 36,250 1.3% 34,956 1.5% 32,814 1.3% 38,778 1.4% 35,738 1.1%16 Other Operating Expenses 81,520 3.0% 87,733 3.9% 13,280 0.5% 37,971 1.4% 50,406 1.6%

17 Total Operating Expenses 1,589,409 58.3% 1,645,684 72.8% 1,572,063 64.7% 1,707,168 63.2% 1,796,165 56.4%

18 Depreciation 250,685 9.2% 225,774 10.0% 52,917 2.2% 249,809 9.2% 342,908 10.8%

19 Operating Income 133,407 4.9% 14,121 0.6% 214,814 8.8% (54,020) -2.0% 138,092 4.3%

20 Total Other (Income)/Expense 53,142 2.0% (84,561) -3.7% 12,447 0.5% 26,487 1.0% 13,439 0.4%

21 Income Before Taxes 80,265 2.9% 98,682 4.4% 202,367 8.3% (80,507) -3.0% 124,653 3.9%22 Income Tax Expense - 0.0% - 0.0% - 0.0% - 0.0% - 0.0%

23 Net Income 80,265$ 2.9% 98,682$ 4.4% 202,367$ 8.3% (80,507)$ -3.0% 124,653$ 3.9%

Source(s):

Federal income tax returns (Form 1120S)

Fiscal Year Ended

2/24/2017

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Questions?

Page 1 of 6

ILLINOIS STATE BAR ASSOCIATION

EXAMINING AND USING FINANCIAL STATEMENTS

TO IDENTIFY ISSUES

Basics of Entities

ISBA French Quarter Festival, New Orleans

March 9-10, 2017

Presented by: Lisa M. Nyuli Ariano, Hardy, Ritt, Nyuli, Richmond, Lytle & Goettel, PC 2000 McDonald Road, Suite 200 South Elgin, IL 60177 847-695-2400 [email protected]

mailto:[email protected]

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BASICS OF ENTITIES

A. Sole proprietorship

1. Simplest form of doing business

2. Typically a d/b/a

3. No separate existence from the owner

4. No organizational document required to initiate the operation of the business,

therefore, will need to find some other method of determining beginning date

if important on issue of whether it is marital or non-marital

5. All business income and loss is reported on sole proprietor’s personal income

tax return

6. No shield for owner from personal liability from the obligations of the business

7. Sale of a sole proprietorship is basically selling the assets used to operate

8. May have bank accounts and profit and loss statement; no balance sheet

9. Owner considered self-employed and pays self employment tax

10. Owner taxed on all income from entity as personal income

11. Look at Schedule C of Individual Tax Return

B. Partnership – governed by Uniform Partnership Act, 805 ILCS 206/1206(b)

1. 2 or more persons or other legal entities form to operate a business and

share in profits

2. Legal entity separated from owners, but the general partners are personally

liable for the partnership’s liabilities

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3. Partnership has a tax status and is required to file tax returns

4. Each partner shall share equally in the profits and surplus remaining after all

liabilities, including those to general partners, are satisfied.

5. Each general partner must contribute toward the losses, whether capital or

otherwise, sustained by the general partnership according to the partner’s

share in the profits.

6. Payments to partners are distributions of the partner’s share of partnership

income or return of capital

7. No entity tax for partnership

8. Issue K-1 to allocate income, losses, deductions, credits, gains, etc. among

the owners

9. Will have profit and loss statement and balance sheet

10. Look at Form 1065

C. Corporations - Business Corporation Act, 805 ILCS 5/1.01

1. If no election, then C Corp

2. Separate legal entity from owners

3. Shareholders are protected from personal liability in most cases

4. Freely transferable interests – although restrictions can be imposed in closely

held corporations, usually via options or right of first refusal for corporation or

other shareholders

5. File Articles of Incorporation with the Secretary of State – good for

determining a date when business started

6. Entity is taxed at the corporate level

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7. Corporation utilizes income, gains, losses, deductions and credits on

corporate return

8. No pass through to individual shareholders

9. Owner Compensation must be reasonable for the services actually being

performed

10. Corporation can provide tax-free benefits, perks, to employees

11. Distributions are either W-2 wages or dividends

12. Look at Form 1120

D. S Corp

1. Defined as a “small business corporation” that has in effect an election under

Code §1362(a). Code §1361(a)(1). A corporation that is not an S corporation

is termed a “C corporation.” Code §1361(a)(2).

2. Business corporation organized under corporate laws.

3. Must qualify and elect to be an S corp

4. S Corp’s income, gains, losses, deduction and credits flow through to the

shareholder’s personal tax returns

5. To qualify as a small business corporation, the corporation must

a. be a domestic corporation;

b. not be an ineligible corporation;

c. not have more than 100 shareholders;

d. have as shareholders only individuals, estates, certain trusts, certain

tax-exempt organizations, and certain qualified retirement plans;

e. not have as a shareholder a nonresident alien; and

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f. have only one class of stock. Code §1361(b)(1)

6. Liability limited to investment amount

7. Employees of S Corp including shareholder/employees not subject to self-

employment tax

8. Other payments to shareholders are considered distributions and not subject

to withholding or self-employment tax

9. Shareholders are taxed on the income of the entity as it is earned, even if not

distributed

10. Look at Form 1120S

E. Limited Liability Company (LLC) – 805 ILCS 180/1-1

1. Combines limited liability of corporations with pass-through treatment for

federal income tax purposes.

2. Has at least one limited partner – an investor who is passive, i.e., not involved

in the operation of the business

3. Legal entity distinct from its shareholders

4. May have a limited life (fixed number of years or specific termination date

5. Owners are called members

6. Liability of limited partner is limited to the partner’s contribution and share of

recourse debt

7. Must have at least one manager who has unlimited liability for LLC liabilities –

manager is in charge of running the business

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8. Each partner taxed on share of LLC income, regardless of whether it is

distributed

9. Self employment tax depends on whether the general partner or limited

partner

10. Look at Form 1120S or Form 1065

Sample Initial Information Request for IRMO Smith January 30, 2017 The following is an initial listing of the documents requested to perform our analyses. As additional information becomes known, further documents may be requested.

I. For Smith Manufacturing, Inc. (“the Company”) and any other operating entity in which Mr. and Mrs. Smith may hold a direct or indirect ownership interest, please provide:

a) Description of business activities and a brief company history for the Company.

b) Annual, preferably CPA-prepared, financial statements (income statements, balance sheets, cash flow statements), on an accrual basis and as detailed as possible, for the fiscal years ended 2012 through 2016.

c) Income tax returns, including all schedules as provided to the IRS, for the fiscal years ended 2012 to 2016.

d) Year-end accounts receivable and payable aging schedules for the last five fiscal years.

e) Schedule of life insurance policies, if any, paid for and/or owned by the Company including annual/monthly premiums, financial statement account(s) in which they are included, named beneficiary (or beneficiaries), current cash surrender value (if any), and stated death benefits.

f) Description of product mix (i.e. major types products manufactured).

g) Listing (including book values and market values) of any and all non-operating assets or assets held for personal use on the Company’ balance sheets (e.g., vacant land, vehicles, watercraft, equipment not in service, buildings, homes or other property not directly used in the Company’ operations).

h) Schedule of all shareholder loan activity (whether to or from) for the last five fiscal years.

i) List of any perquisites received by owners and/or managers, including any personal expenses paid by the Company, for the last three fiscal years. (Please include supporting bank statements, credit card statements, expense logs, or other underlying documentation, for these expenses.)

j) Copies of any and all owner expense reports, including but not limited to journals, logs, and registers evidencing reimbursement of expenses for the last five fiscal years.

k) Copies of annual payroll summaries for the last five fiscal years with a brief job description (including tenure) for each employee.

l) Copies of detailed general ledgers, trial balances, and year-end adjusting journal entries on an annual basis for the last five fiscal years.

m) All monthly bank (and/or any other financial institution) account statements and credit card statements from accounts utilized by the Company for the last three fiscal years. Depending on the level of detail in the general ledgers, copies of cancelled checks, credit/debit memos, wire transfers, etc. may be requested at a later date if not contained within the copies of the bank statements.

n) Copies of cash receipts and cash disbursements journals (with detail regarding payor/payee) for each of the last three fiscal years.

Smith Divorce January 30, 2017 Page 2

o) Please provide a current electronic copy of the Company’s QuickBooks backup file, including the

Administrator login credentials.

p) Copies of any business plans, budgets, forecasts, or projections, including those related to capital expenditures prepared in the last three years.

q) Details of any and all written or verbal offers received during the past five years to purchase stock in the Company or any of the Company’ individual assets.

r) All details of any and all transactions in the Company stock (including gifts) during the past five years, including, but not limited to, the parties involved, the price or other consideration paid, and how the price or other consideration was agreed upon.

s) Articles of incorporation, corporate by-laws and board of directors’ minutes.

t) List of affiliated Company, partnerships, or interests including the nature and amount of the investment in each.

u) Current company organizational chart(s).

v) Historical schedule of owners’ compensation, including total salary and wage compensation to all owners and/or officers of the Company for the last five fiscal years. Total compensation includes salaries, bonuses, and deferred compensation.

w) All information related to any contingent liabilities.

x) Copies or summaries of major contracts or agreements (with all amendments), including: i) Buy/sell agreements; ii) Stock restriction agreements; iii) Shareholder/member agreements; iv) Employment agreements; v) Relationship agreements; vi) Real estate and equipment leases; and vii) Debt/loan/mortgage agreements.

II. For any and all real property in which Mr. or Mrs. Smith hold a direct or indirect ownership interest, or held a direct or indirect ownership interest within the past five years, please provide:

a) Descriptions of all real property owned including address, parcel number, and legal description.

b) If the real property is held within a business entity, please provide income statements and balance sheets for the last five fiscal years.

c) Statements supporting any and all current outstanding debt balances associated with each piece of real property.

d) Copies of any and all real estate appraisals performed within the last five years.

e) The most recent annual property tax bills.

f) Supporting documentation if the properties are currently listed or if are there any offers or options to purchase.

Smith Divorce January 30, 2017 Page 3

g) Closing documents related to any purchases and/or sales of property taking place within the last

five years.

h) Any and all lease agreements currently in place or those currently drafted for future execution.

i) Recent maintenance/replacement costs regarding major items (including the roof, heating and air conditioning equipment, etc.), and detail for any and all planned future capital expenditures.

III. For Mr. or Mrs. Smith, please provide the following personal financial information:

a) Federal and state individual income tax returns (including W-2s, 1099s and K-1s, if applicable) for the last five years.

b) Copies of all personal financial or net worth statements prepared during the last five years, including copies of all records relied upon in compiling the statement(s).

c) All monthly bank (and/or any other financial institution) account statements and credit card statements from accounts utilized by the Mr. and/or Mrs. Smith for the last three fiscal years.

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SAMPLE QUESTIONS COMPANY BACKGROUND 1. Describe the company's legal structure.

Company's legal name:___________________________________________________________________________

Type of entity (corporation, partnership, proprietorship):________________________________________________

Date of incorporation or formation:__________________________________________________________________

For corporations:

State incorporated:________________________________________________________________________________ Type of Corporation:______________________________________________________________________________ Number of common shares authorized:_______________________________________________________________ Par value:_______________________________________________________________________________________ Number of shares issued and outstanding:_____________________________________________________________ Number of treasury shares:_________________________________________________________________________ Briefly describe other types of stock._________________________________________________________________ _______________________________________________________________________________________________ 2. List the major stockholders, partners, or owners of the company and their percentage of ownership or number of shares

owned. Name % Ownership or Number of Shares Owned ______________________________________________ _________________________________________ ______________________________________________ _________________________________________ ______________________________________________ _________________________________________ ______________________________________________ _________________________________________ 3. List all known related parties (that is, subsidiaries, affiliates, or relatives) that the company does business with. Name Relationship ______________________________________________ ________________________________________ ______________________________________________ ________________________________________ ______________________________________________ ________________________________________ ______________________________________________ ________________________________________ 4. List each location maintained by the company and the primary activity at each, that is, executive office, plant, sales office,

etc. Location Activity ______________________________________________ ________________________________________ ______________________________________________ ________________________________________ ______________________________________________ ________________________________________ ______________________________________________ ________________________________________ ______________________________________________ ________________________________________ ______________________________________________ ________________________________________ ______________________________________________ ________________________________________

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5. Discuss evolution of (a) product lines, (b) customer base, (c) locations, (d) marketing activities, (e) distribution methods,

(f) employees, (g) acquisitions, and (h) ownership. ______________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ 6. Other key dates or events in company history. _________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________

PRODUCTS OR SERVICES

7. Description of the company's products or services: _____________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 8. How are the products or services used? ______________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 9. Describe the company's customer base. ______________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 10. Breakdown of sales and gross profit by product line: Gross Percent of Profit Product Sales Percentage _______________________________________________ __________ __________ _______________________________________________ __________ __________ _______________________________________________ __________ __________ _______________________________________________ __________ __________ _______________________________________________ __________ __________ _______________________________________________ __________ __________ _______________________________________________ __________ __________

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11. What are the products' advantages and disadvantages versus its competitors? Advantages:_____________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ Disadvantages: __________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 12. Are the products proprietary? Does the company have patents, technology, or expertise that prevent others from copying

the products? ____________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 13. What other products compete with the company's products? _____________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 14. Are sales cyclical? What economic factors (inflation, interest rates, etc.) affect sales? ________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 15. Are sales seasonal? ______________________________________________________________________________ _______________________________________________________________________________________________ 16. Discuss any industry technology trends. _____________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________

MARKETING & DISTRIBUTION 17. What is the size (in dollars) of the market in the industry? _______________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 18. What is the company's market share? How fragmented is the market? Is the market growing or shrinking? _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________

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19. How are sales people compensated? _________________________________________________________________ _______________________________________________________________________________________________ 20. What is the market area and what determines its size? How important are freight costs? ______________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 21. Are sales concentrated in a few customers? What percentage of total sales are made to the five largest customers? ______________________________________________________________________________________________ 22. How loyal are customers, that is, do they tend to buy from the same company or switch? How does pricing affect customer

loyalty? ________________________________________________________________________________ _______________________________________________________________________________________________ 23. Does the company sell to the federal, state, or local government or government agencies? Are those sales likely to increase

or decrease? _____________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 24. What is the key selling feature--product, price, service, brand name, packaging, etc.? ________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 25. Who determines pricing policies determined? To what degree do competitors' prices affect company policy?

_______________________________________________________________________________________________ _______________________________________________________________________________________________ 26. What are normal sales and credit terms? Describe a typical customer contract. _____________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 27. What type of promotion and advertising methods does the company use? ___________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________

COMPETITION 28. Who are the company's major competitors? Where are they located? How big are they? What is their market share? How

diversified are they? [Identify those competitors (if any) that are publicly held.] ________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 29. How does the company compare in size and market share to its competitors? ________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 30. How easy is it to enter the industry? What are the barriers to entry? ______________________________________ _______________________________________________________________________________________________

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_______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 31. What are the company's competitive strengths and weaknesses? ___________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 32. Describe the company's organization structure. ____________________________________________________________ __________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 33. What is the relative size of the company's divisions in terms of sales and gross profits? How interrelated are the divisions?

How much vertical integration is there among the divisions? How easily can a division be eliminated without affecting other operations? __________________________________________________________________

_______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 34. Describe the manufacturing or service process. Are any of the methods or equipment proprietary? _____________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 35. Third party lease? _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 36. What is the overall condition of the company's equipment? Is there any inefficient or obsolete equipment? When is the

machinery likely to be replaced? What is the likelihood of major repairs? _______________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 37. How extensively are independent contractors used? ____________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________

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38. Discuss key suppliers. Are any suppliers the sole source? Have there been any major problems in getting raw materials? Are there long lead times to get the purchased goods? _________________________________________

_______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 39. Discuss the company's officers (age, health, education, experience, and current duties). ______________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 40. Discuss basis of compensation. Also, describe employee benefits (insurance, stock options, profit sharing, etc.). _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 41. Discuss any employment and/or independent contracts.______________________________________________________

____________________________________________________________________________________________________________________________________________________________________________________________

42. How easily can officers be replaced (i.e., is there one or a few key officers on which the success of the company depends

that cannot be easily replaced)? _____________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ FINANCIAL 43. Have there been any nonrecurring or extraordinary income or expenses during the last five years? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 44. What are the main discretionary expenses (such as bonus, profit sharing, repairs, advertising, and R&D)? How have the

levels of those expenses changed during the last five years?_____________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 45. Describe short-term sources of credit and how they were used during the last five years._________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _______________________________________________________________________________________________ 46. Describe any written or oral offers received for the company in the last five years.____________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________

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47. Discuss any plans to sell all or part of the company or hold a public offering. _______________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 48. Discuss plans for major capital expenditures, how they will be financed, and how much represents expansion versus replacement of existing assets.______________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 49. Discuss any contingent liabilities, including lawsuit and pending or threatened litigation._______________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 50. Describe any nonoperating assets, such as aircraft, boats, and real estate investments._________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________

COMPANY EXPECTATIONS

51. Describe relevant past and expected future trends for the company, such as growth patterns, expansion or cutbacks of business segments, possible spinoffs, mergers or acquisitions.____________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ 52. Describe the company’s future expectations, goals, objectives, and long-range plans in the following areas: Products and services._____________________________________________________________________________ _______________________________________________________________________________________________ Marketing and customers.__________________________________________________________________________ _______________________________________________________________________________________________ R&D and technology._____________________________________________________________________________ _______________________________________________________________________________________________

SHOW ME THE MONEY!

What is Income, and Where

do I find it?

RORY T. WEILER

WEILER & LENGLE, P.C.

ST. CHARLES, ILLINOIS

Presented at ISBA French Quarter Festival New Orleans, La., March 2017

I. Of GAAPs and GAAS. A. What are Generally Accepted Accounting Principles, and why should I care?

1. The use of GAAP. a. Previously promulgated by AICPA b. Now codified by Financial Accounting Standards

Board (FASB). c. Accounting Principles for preparing, presenting

and reporting financial statements. i. Statements used by businesses ii. Ultimately end up on tax returns.

2. Assumptions: a. Each economic entity has separate records. i. Therefore business and personal items are handled separately. b. Full disclosure-requires lawsuits, incomplete items

be disclosed, usually via footnotes. 3. Principles:

a. Accrual v. cash basis accounting. i. Important because financial events are

recorded when they occur, regardless of when cash changes hands.

4. Constraints: a. Relevant, reliable and consistent. b. Principle of conservatism-least optimistic estimates when two are equally likely. c. Materiality principle-accountant using sound

judgment, may ignore any accounting principle when there is no effect on the user of the info.

5. Impact on determinations that affect/impact cash flow. 6. The accountants get to make independent judgment calls.

a. Selection of income accounting methods. i. Accrual v. Cash can greatly swing cash

flows. b. Depreciation methods.

i. Straight line v. Accelerated or Section 179. II. What is Income, and Where do I Find It?

A. Determining Income-Establishing Ability to Pay. 1. What is income? “All of it, boy.”

a. IRMO: Rogers, 213 Ill.App.3d 129; 820 N.E.2d 386. (Gifts and “loans” from parents).

b. IRMO: Lindman, 356 Ill.App.3d 462; 824 N.E.2d 1219. (One time-IRA distribution) (2nd dist.)

i. “gain, money or payment received including investments.” c. IRMO: Colangelo, 355 Ill.App.3d 383; 822

N.E.2d 571. (Stock options executed after JDM). d. IRMO: Dodds, 222 Ill.App.3d 99; 583 N.E. 2d

608. (Worker’s comp lump sum settlement). (2d) i. IRC, Principal & Interest Act, Senior Citizen’s and Disabled persons Act). ii. 21% of $108K-ct noted could have elected periodic payments. iii. Withholding act specifically references WC iv. Lesson:-Be involved WC settlements e. IRMO: Sharp, 369 Ill.App.3d 271; 860 N.E.2d

1256. (Distributions from spendthrift trust) i. Used for current support or arrearages.

2. Or maybe not all of it. a. IRMO: Tegeler, 365 Ill.App.3d 448; 848 N.E.2d

173. (2d District) i. Farmer husband’s net income subject to child support was his gross revenue, less operating expenses; ii. Farmer husband’s operating LOC was not income subject to support. ($460-$660K); iii. Where personal spending exceeds net income, the excess might be subject to CS. b. IRMO: O’Daniel, 382 Ill.App.3d 845; 889 N.E.2d

254. (4th Dist.). i. Disagrees with Lindman. ii. Characterizes IRA as savings account-the

return of the person’s own money, not a gain;

iii. Appreciation on IRA could be subject to CS. c. IRMO: Hassiepen, 269 Ill.App.3d 559; 646

N.E.2d 1348. (4th Dist.) i. Ex-husband and second wife start ptnshp. ii. Business is in effect operated through joint

checking account, with 2nd wife’s credit; iii. 2nd wife quits her day job-works at business. iv. Trial court finds partnership, assigns ½ business income to ex husband for CS. d. Villanueva v. O’Gara, 282 Ill.App.3d 147; 668

N.E.2d 589. (2nd Dist) PI proceeds ($250K) i. Pre-Rogers/Lindman; ii. Distinguishes Dodd by referring to withholding act reference to WC-none for PI

iii. No CS on pain and suffering (not in WC); iv. Limited to past & future lost earnings;

e. IRMO: Baumgartner, 384 Ill.App.3d 39; 890 N.E.2d 1256. (1st Dist.)

i. Mtge loan, made by bf lender not income. ii. Sale proceeds from residence not income, although they could be. iii. Here, constituted return of payments previously made, and proceeds rolled into new home necessitated by job loss.

3. Dealing with the self-employed. a. “Passive” income.

i. IRMO: Freesen, 275 Ill.App.3d 97; 655 N.E.2d 1144.

a. Wide fluctuations of income call for averaging over at least three years; b. Passive income, not actually rec’d is not subject to CS (Sub-s profit). ii. IRMO: Partney, 212 Ill.App.3d 586; 571

N.E.2d 266. a. Passive investment losses are not deductible from income subject to child support. b. RE investment losses can’t be used to reduce net income.

b. Retained earnings-“that part of a corporation’s net income which is retained by the corporation, rather than being distributed to the shareholders as dividends.” c. In a sub-chapter S setting, you may consider retained earnings as previously taxed,

undistributed income, that is often used to fund “distributions” to the shareholders in subsequent years when cash flow permits. d. At least you could have considered it as such until:

i. IRMO: Joynt, 375 Ill.App.3d 817; 874 N.E.2d 916. (3rd Dist.).

a. Hybrid approach to retained earnings- asset “until severed.” b. As such, they are a component of value, until distributed. c. Proposition: RE of a minority shareholder without right to control distribution remained SH NM prop. ii. IRMO: Schmitt, 391 Ill.App.3d 1010; 909

N.E.2d 221. (2nd Dist.) a. Mr. S. being the sole shareholder,

with control over distributions, RE are attributed to his personal efforts and therefore marital property.

iii. IRMO: Lundahl, 2009 Ill.App.Lexis 1172; 919 N.E.2d 480. a. The next step-no real point in discussing M v. NM, as Schmitt did; H owned the business, controlled it, took distributions at his leisure, RE constituted income due to his personal efforts.

iv. Lesson: RE in a subchapter S corporation are potential sources of income for CS, unless: a. Payor is a minority shareholder without control; b. There is adequate testimony to explain the reason for retention.

4. 750 ILCS 505(a)(3)(h)-Expenditures for repayment of debts that represent reasonable and necessary expenses for the production of income.

a. Depreciation. i. IRMO: Davis, 287 Ill.App.3d 846; 679

N.E.2d 110. (5th Dist.-Dentist case).

a. A payor’s case, you must know it. b. Case which addresses just about all 505(a)(3)(h)-expenses. c. Depreciation not income but a return of capital-SL depreciation. ii. IRMO: Nelson, 297 Ill.App.3d 651; 698

N.E.2d 1084. (3rd Dist.-Farmer) a. Farmer deducted depreciation expenses for equipment purchased, trial court added depreciation back. b. 3rd Dist took strict constructionist

view-in order to be deductible under (a)(3)(h): Expenses is R&N for production of income AND falls into category of debt repayment as evidenced by a repayment schedule.

c. Interesting concurring opinions. iii. IRMO: Minear, 181 Ill.2d 552; 693 N.E.2d

379. a. SCt chooses not to decide if

is deductible under (a)(3)(h) because husband failed to offer evidence to explain the depreciation deduction.

b. Lesson: Might be a good idea to have somebody testify as to what depreciation represented, income wise.

iv. IRMO: Boland, 308 Ill.App.3d 1063; 721 N.E.2d 815. (4th Dist.-Farmer)

a. Depreciation might be a reasonable and necessary expense for the production of income, it is not an expenditure for repayment of debt. therefore, doesn’t meet second prong of (a)(3)(h) test for deductibility. b. Court can always deviate from guidelines. v. Posey v. Tate, 275 Ill.App.3d 822; 656

N.E.2d 222. (1st Dist).

a. Deferred comp includible in income. b. Depreciation (SL) is return of capital not income and therefore deductible under (a)(3)(h).

b. Non-reimbursed expenses. i. IRMO: Baumgartner, 384 Ill.App.3d 39-;

890 N.E.2d 1256. a. Fact that business expenses exceed income is not, in and of itself, evide. that they are not R&N. b. Expenses can be reasonable in one context and not in another.

c. Detailed expenditures and itemization required.

ii. IRMO: Tegeler, 365 Ill.App.3d 448; 848 N.E.2d 173.

a. Operating expenses, properly documented deductible under (a)(3)(h)

iii. Gay v. Dunlap, 279 Ill.App.3d 140; 664 N.E.2d 88. a. Necessary means expended with a good faith belief income will increase even if it doesn’t; b. Reasonable means not immoderate or excessive. c. Non-reimbursed food and entertain not deductible. d. Mercedes lease might be.

c. Student Loans. i. IRMO: Davis, 287 Ill.App.3d 846; 679

N.E.2d 110. a. Student loans deductible. b. But not loan taken to pay taxes. ii. Roper v. Johns, 345 Ill.App.3d 1127; 804

N.E.2d 620. (BS, MS, and Law) a. Trial court held most of benefits of law school loans would be realized after child reached majority and it

was unfair to allow 100% deductible.

5. I still can’t figure it out; now what? d. 750 ILCS 5/505(a)(5). e. IRMO: Carpel, 232 Ill.App.3d 806; 597 N.E.2d

847. f. Income averaging.

i. IRMO: Nelson, 297 Ill.App.3d 651; 698 N.E.2d 1084. (3rd Dist).

a. Three year averaging approved. ii. IRMO: Garrett, 336 Ill.App.3d 1018; 785

N.E.2d 172. (5th Dist). a. Three year averaging approved-hi income payor. iii. Rejected: IRMO: Schroeder, 215

Ill.App.3d 156; 574 N.E.2d 834 (4th Dist). a. Six year averaging for funeral home owner reversed.

g. Concealment/lack of credibility of payor. h. IRMO: Severino, 298 Ill.App.3d 224; 698 N.E.2d

193. (2nd Dist). i. Resp. lacked credibility, less than candid discrepancies in testimony as to income; 505(a)(5) appropriate-deviation not required to state income where income can’t be determined. ii. IRMO: Takata, 304 Ill.App.3d 85; 709

N.E.2d 715. a. Resp found not to be credible.

iii. IRMO: Sanfratello, 393 Ill.App.3d 85; 913 n.E.2d 1077 (NOT IN OUTLINE).

B. Tax Returns and How to Read Them-Show me the Money! 1. Corporate Tax Returns.

a. 1120 b. 1120S

2. Personal Tax Returns. a. Schedule B. b. Form 2106. c. Schedule E. d. K-1. i. If Box 16 Distributions equal tax on Box 1

income, “phantom income.” Passive profit as in Freesen; if Box 16 distributions exceed tax on Box 1 distributions-cash for CS.

Form 1120 Department of the Treasul}'

lntemal Revenue Se/VIce

2 3 4

CD 5 Interest

U.S. Corporation Income Tax Return For calendar year -or tax year

beginning ------------ , ending ------------

E 6 0 u Gross rents ............ .. .......... .. .................. ...... ... ................ .. ....... .. ......................... ............ ....................... . !----"=---1----------

.5

"J c 0 = u :I , -8 c 0 C/1 c 0 ;; ! ~ .. .s

C/1 c 0 ;; u s C/1

.E CD Cll !a.

7 8 9

10

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Gross royalties ............. ...... ...... ............................. ................................ ..................... ......... ..................... . Capital gain net income (attach Schedule D (Form 1120)) ...................................... ........ ... .......... ..................... . Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797) ......... ........................................................ .

Other Income (attach schedule) ......... ................................................... ~-~-~ .... ~.'r.b.'r.~-~-~-N'r ... J ............ .

Compensation of officers (Schedule E,line 4) Salaries and wages (less employment credits)

Repairs and maintenance .......... ....... ... ....................................... ........... .. .................................. ... .... .... ...... ~-=--1----------Bad debts ................... .... ......................................... ............ ................. ....... ............................................ j----:.=---1--------

Rents .. .......... .. .......... ........... ..... ........ .. ........................................................... ......................... ... ....... ..... . Taxes and licenses ..... ............ .. ........ ..... .......... .................. .............. . ~.~-~----~.'r~.'r-~.~-~N'r .... ~ ........... .. Interest ...................................... .. ..................... .... ................................................................................. . Charitable contributions .. ............ ......... ................................ .............. ~-~-~- ... ~.'r.b.'r.~-~-~N'r .... ~ ............ . Depreciation from Form 4562 not claimed on Schedule A or elsewhere on return (attach Form 4562) ............... .. ...... .

Depletion ..................... ............ ................................... ............................. ...................................... ......... ~-=~--------Advertising .......................................................... ............................................ ......... ................... ......... .. Pension, profit·sharing, etc., plans ... .............. ............ ..... .. ........... .............. ... ....................... ... .............. ...... . Employee benefit programs ........... ................................... ............................ ............. .............. ........... ....... . Domestic production activities deduction (attach Form 8903) ............................................................................. . Other deductions (attach schedule) ...................................................... S.~.~ ... S.r::r..?\r;r.~~~-N'r .... 4 ..... ....... . Total deductions. Add lines 12 through 26 ............ ................ ... ......................................................... ..... ..,. ~~--=-~-=-;;;;-,;..t...;::..,;:...~ Taxable Income before net operating loss deduction and speclal deductions. Subtract line 27 from

Less: a Net operating loss deduction .............. $.:-r.~:.r.:e!M:e!N:.r. ... :? ........... ~!.!!....!------__:~ line ................ ........................ ..

30· Taxable Income. Subtract line 29c from line 28 (see instructions) ................................... ............ ................. .. 31 Total tax (Schedule J,line 10) ....

32 a -overpayment credited to -b - estimated tax paym.ents ......

c - refund applied for on Form e Tax deposited with Form 7004 .............................................................. ..

f Credits: (1) Form 2439 (2) Form 4136 ------- I....!:!.~L--------==-if-=:L-11---------33 Estimated tax penalty (see instructions). Check if Form 2220 Is attached ..................................... .. 34 Amount owed. If line 32g is smaller than the total of lines 31 and 33, enter amount owed

35 Overpayment. If line 32g is larger than the total of lines 31 and 33, enter amount overpaid ........ .............................. .

36 Under penalties of pe~ury, I declare that I have examined this retum, Including accompanying SChedules and statements, and to the best of my knowledge and belief, It Is true, correc~ and complete. Doclanttlon of proparer (other than taxpayer) is based on all Information of which preparer has any knowledge.

Sign Here ~Signature of officer

Mil'/ tne11RS discuss this

r;~,tWn "tl~o~ preparer

00 Yes D No

Paid Preparer's Use Only

Pnepane(s signature

Date

Inventory at beginning of year 1

2

3

4 5 6

Purchases .............................................................................................................. ....................................... 1-'=--t---------Cost of labor ....... .. ......................................................................................................................................... .

Additional section 263A costs (attach schedule) ............................................................ .. ........................................ r-~---------Othercosts (attach schedule) .............................................. ...................... .......... ............................ ............ ..... r--:~r---------Total. Add lines 1 through 5 ............................. .......... ......... .............................................................................. 1--'=-t--------

7 Inventory at end of year .................................................................................................................................... t--=--t---------8 Cost ol goods sold. Subtract line 7 from line 6. Enter here and on page 1, line 2 ........................................................ . 9 a Check all methods used for valuing closing Inventory:

(i) D Cost (ii) D Lower ol cost or market (iii) D other (Specify method used and attach explanation.) ....

-----------------------------~~~-b Check if there was a writedown of subnormal goods ........ ..................... ........... ..................... ................. .................. .... .. ........................ ..,. D c Check If the LIFO Inventory method was adopted this tax year for any goods (If checked, attach Form 970) .. . .. . ....... ... . .. . . .. . ... .. . ...... ... ........ ....... .... D

d ~!~~n~l~n~~~~:~oc~:Pe~~e~d u:~:~~~;;or. t~i-~ -~a~ .ye.a r: -~~~~ :. ~~-r-~~-~~~-~~ .( ~-r ~~-~~~-t~ ~. ~-f·.............. . ........ . ....... . . .. .......... .. . L..l -=9=-d --'1'-----.===;-----.===.---e If property Is produced or acquired lor resale, do the rules of section 263A apply to the corporation? ..................... ... ... ... .... ........... D Yes 0 No I Was there any change In determining quantities, cost, or valuations between opening and closing inventory?

t 'Sbtle(ifuitC:j Dividends and Special Deductions (see Instructions)

Dividends from less·than·20%·owned domestic corporations (other than

debt-financed stock) ......................................................................................... . 2 Dividends from 20o/o·or·more·owned domestic corporations (other than debt-financed

stock) .......................... .... ............................................... .... ............................ . . 3 Dividends on debt-nnanced stock of domeaUc and foreign corporations

4 Dividends on certain preferred stock of leu-than-20%-owned public utllltles •........•..........••••••. . ..•..

5 Dividends on certain preferred stock oi20'K-o,.mcre-owned public utilities ••.................•••••••.......

(a) Dividends received (b)%

6 Dividends from less-than-20%-owned lo,..gn corporations and certain FSCs ................................. 1-----------t---=-=----tl----------7 Dividends from 20%-or-nnc...owned foreign corporatlcns and certain FSCa ••••••••••...•.•.. .. .. ...... ..... t----------1---=-"----!1---------8 Dividends !rom wholly owned foreign subsidiaries .................................................. .

9 Total. Add lines 1 through 8 ................................................................................ . 10 Dividends !rom domestic corporations received by a small business investment

company operating under the Small Business Investment Act of 1958 .......................... .

11 Dividends from alftllated group members .................................................................. , .... .

12 Dividends from certain FSCs

13 Dividends from foreign corpora tiona not Included on lines 3, 6, 7, 8, 11 , or 12

14 Income from controlled foreign corporation a undw aubpart F (attach Form(s) S471) ....................... .

15 Foreign dividend gross-up ................................................................................ . 16 IC -DISC and Iarmer DISC dividendo not lnc:fuded on lines 1, 2, or3 ..... , ................................... .

17 Other dividends ............................................................................................. . 18 Deduction lor dividends paid on certain preferred stock of public utilities ...................... . 19 Total dividends. Add lines 1 through 17. Enter here and on page 1, line 4 ............... ....

(a) Name of officer

2 Total compensation of officers ......................... .................................................. .......................................... .. ............ . 3 Compensation ol officers claimed on Schedule A and elsewhere on return ........................................................................... .

1

2

3

4

Check if the corporation Is a member of a controlled group (attach Schedule 0 (Form 1120)) Income tax. Check if a qualified personal service corporation

(see instructions) ...................... .... .... ..... .......... .... ........... .............. ........... ...... ........ ....... .... ..... ....... ...... . Alternative minimum tax (attach Form 4626) .................................................... ... ............................... .................. . Add lines 2 and 3 ............................................................................................ .

Sa Foreign tax credit (attach Form 1118) ....................................... .......................... . b Credits from Forms 5735 and 8834 .......................... .......................................... . c General business credit. Check applicable box(es): D Form 3800 D Form 5884

D Form 6478 D Form 8835, Section B D Form 8844 D Form 8846

d Cred~ for prior year minimum tax (attach Form 8827) ..... .............. ......................... . e Bond credits from: D Form 8860 D Form 8912 .. .................. ......... .

0 .

6 Total credits. Add lines Sa through Se .............................................................. ................................................... 1-'::........Jr--------...,...-7 Subtract line 6 from line 4 ........... ............................................. ........................................................................ . 8 Personal holding company tax (attach Schedule PH (Form 1120)) .............................. ......................................... ... . 9 Other taxes. Check If from: D Form 4255 D Form 8611 D Form 8697

D Form 8866 D Form 8902 D Other (attach schedule) ....................... .

2

3

Indirectly, 50% or more of the voting stock of a domestic corporation? (For rules of attribution, see section 267(c).) .... .. If 'Yes,' attach a schedule showing: (a) name and employer Identification number (EIN), (b) percentage owned, and (c) taxable Income or (loss) before NOLand special deduction of such corporation for the tax year ending with or within your tax year.

4 Is the corporation a subsidiary In an affiliated group or a parent-subsidiary controlled group? ................................ . If 'Yes,' enter name and EIN of the parent corporation ..,..

5 At the end of the tax year, did any indiVidual, partnership, corporation, estate, or trust own, directly or indirectly, 50% or more of the corporation's voting stock? (For rules of attribution, see section 267(c).) ................................... . If 'Yes,' attach a schedule showing name and Identifying number. (Do not Include any Information already entered

In 4 above.) Enter percentage owned ..,.. -------6 During this tax year, did the corporation pay dividends (other

than stock dividends and distributions in exchange for stock) In excess of the corporation's current and accumulated earnings and proms? (See sections 301 and 316.) ........ .... .. If 'Yes,' file Form 5452, Corporate Report of Nondividend Distributions. If this Is a consolidated return, answer here for the parent corporation and on Form 851 , Affiliations Schedule, for

JWA

At any time during the tax year, did one foreign person own, directly or indirectly, at least 25% of (a) the total voting power of all classes of stock of the corporation entitled to vote or (b) the total value of all classes of stock ofthe corporation? .......................................................... .

If 'Yes,' enter: (a) Percentage owned ..,..------and (b) Owner's country ..,..

c The corporation may have to file Form 5472, Information Return of a 25% Foreign·Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. Enter number of Forms 5472 attached ..,.. Check this box if the corporation issued publicly offered debt instruments with original issue discount ............ ..,.. D If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. Enter the amount of tax-exempt interest received or accrued during the tax year ..,.. $

10 Enter the number of shareholders at the end of the tax year (if 100 or fewer) ..,.. 1 0

11 If the corporation has an NOL for the tax year and is electing to forego the carryback period, check here ... ..,.. 00 If the corporation Is filing a consolidated return, the statement required by Regulations section 1.1502-21 (b)(3) must be attached or the election will not be valid.

12 Enter the available NOL carryover from prior tax years (Do not reduce ~ by any deduction on line 29a.) ..,. $ 18,925.

~-=~r.,;;.:;;,.j 13 Are the corporation's total receipts (line 1a plus lines 4 through 10 on page 1) for the tax year and its total assets at the end of the tax year less than $250,000? ......................................... . If 'Yes,' the corporation Is not required to complete Schedules L, M·1, and M·2 on page 4. Instead, enter the total amount of cash distributions and the book value of property distributions (other than cash) made during the tax year ..,.. $

Form 1120

Assets

1 Cash ................................................. . 2a Trade notes and accounts receivable ........ . b Less allowance for bad debts ................. .

3 Inventories ........................................ . 4 U.S. government obligations ................. . 5 Tax-exempt securities .......................... . 6 Other cutNnl assets (all sell.) ..•.•.•••••. . . .......

7 Loans to shareholders .......................... . 8 Mortgage and real estate loans ................ .. 9 Other Investments (all sch.) ..................... .. .

1 Da Buildings and other depreciable assets ..... . b Less accumulated depreciation .............. .

11 a Depletable assets ....................... ..... ... .. b Less accumulated depletion .................... .

12 Land (net of any amortization) ................. . 1 3a Intangible assets (amortizable only) ...... .. .

b Less accumulated amortization ............. .. 14 Other assets (alt. sch.) .......................... .

Liabilities and Shareholders' Equity 1 6 Accounts payable ............................... .. 1 7 Maltg8ges, notes, bonds ~able In less !han 1 year

18 Other CUtNn!llabllll!es (all sch.) S.'l'.M'l' .... Q ... . 19 Loans from shareholders ....................... . 20 Mortgeges. notae. bonds ~able In 1 yeatorrnore

21 Other liabilities (alt. sch.) .......... ............. . 22 Cap~al stock: a Preferred stock .............. .

b Common stock .............. . 23 Additional paid·ln capital ....................... . 24 Retained ...-nlngs •

Approprta!Aid (ottach achedulej ... . .........•••.•.•.

25 Retained earnings· Unappropriated ........ . Adjuatments to ahareholders'

26 equity (altllch sclledule) ............................. .

Less cost of treasury stock .................... .

Reconciliation of Income {Loss) per Books With Income per Return Nota: Schedule M-3 ired instead of Schedule M-11ftotal assets are $10 million or more- see instructions

1 Net income (loss) per books ......... ............ 7 Income recorded on books this year not 2 Federal income tax per books .......... ........... included on this return (Itemize): 3 Excess of capital losses over capital gains Tax-exempt interest $ -------4 Income subject to Ill< not recorded on books !his year

(itemize):----------

5 Expenses recorded on books this year not deducted on this return (itemize):

a Depreciation ..... $ -------b ~.::~:~~. . $ c ;:--~..,;;:_1 s -------

Balance at beginning of year .................... . Net income (loss) per books .................... . Other Increases (itemize):

Deductions on this return not charged against book income this year (itemize):

a Depreciation $ -------b ~~:'~~1\S .. ..... $ -------

a Cash ...................... ........ 1--------b Stock ............................. . c Property

Other decreases (itemize) :

Fonn 4562 Department ol the Treesury Internal Revenue Service

Depreciation and Amortization (Including Information on List ed Property) OTHER

..,.. See instructions. ..,.. Attach to tax return. Business or ecllvity to which this fonn relates

7 Listed property. Enter the amount from line 29 ........................... ......... ................... .. 8 Total elected cost of section 179 property. Add amounts In column (c), lines 6 and 7 ......................................... .

9 Tentative deduction. Enter the smaller of line 5 or line 8 ................................................................................... . 10 Carryover of disallowed deduction from line 13 of your 2006 Form 4562 .......................................................... ..

Business Income limitation. Enter the smaller of business income (not less than zero) or line 5 .......................... .

Section 179 expense deduction. Add lines 9 and 10, but do not enter more than line 11 ,.:.:.:.:..:=;..:.:..:.;c:.:.:.:="'""-'="'""-'~.....:.:=4

' IJ>ab1ftl Special Depreciation Allowance and Other Depreciation (Do not Include listed property.)

14 Special allowance for qualified New Yor1c Liberty or Gulf Opportunity Zone property (other than listed property) and cellulosic

biomass ethanol plant property placed in service during the tax year ..............................................................................

15 Property subject to section 168(1){1) election ................................................................................................... 16 Other deoreclatlon Oncludino ACASl ··········································································································· ···· E =~ .w. ,:;I MACRS Depreciation (Do not Include listed property.) (See Instructions.)

21

22

Sect•on A

MAC AS deductions for assets placed in service in tax years beginning before ..

14

15 16

(g) Depreciation deduction

25

27

(a) Type of property

(list vehicles first )

50% or less in a

computers, and

28 Add amounts In column (h), lines 25 through 27. Enter here and on line 21, page 1 ................................... .

Section B - Information on Use of Vehicles

Complete this section for vehicles used by a sole proprietor, partner, or other 'more than 5% owner,' or related person. If you provided vehicles to your employees, first answer the questions in Section C to see if you meet an exception to completing this section for those vehicles.

(a) (b) (c) (d) (e) (f)

30 Total businessi1nvestment miles driven during the Vehicle Vehicle Vehicle Vehicle Vehicle Vehicle

year (do not Include commuting miles) ....... ... .......

31 Total commuting miles driven during the year ... 32 Total other personal (noncommuting) miles

driven ............... ................ ................................ 33 Total miles driven during the year.

Add lines 30 through 32 ........... .........................

34 Was the vehicle available for personal use Yes No Yes No Yes No Yes No Yes No Yes

during off-duty hours? ..................................... 35 Was the vehicle used primarily by a more

than 5% owner or related person? ········ ·········· 36 Is another vehicle available for personal

use? ....................................................... ........ Section C - Questions for Employers Who Provide Vehicles for Use by Their Employees

No

Answer these questions to determine If you meet an exception to completing Section B for vehicles used by employees who are not more than 5%

owners or related arsons.

37 Do you maintain a written policy statement that prohibits all personal use of vehlcles,lncluding commuting, by your Yes No

employees? .............. ...... .... ... .. .................... ...... ............. .... ..................................................................................................... .. 38 Do you maintain a written policy statement that prohibits personal use of vehicles, except commuting, by your

employees? See the instructions for vehicles used by corporate officers, directors, or 1% or more owners ............. .................... ..

39 Do you treat all use of vehicles by employees as personal use? ............................................................................................ ..

40 Do you provide more than fiVe vehicles to your employees, obtain information from your employees about

the use of the vehicles, and retain the Information received? . .. ........................ ..

41

(c) (f) Amortlzable

amount

(e) Amottudon

period or pen:enlage Amortization for this year

42 Amortization of costs that

43 Amortization of costs that began before your -tax year

Total. Add amounts in column . See the instructions for where tore ort .......................... .. ....... .. ................ ..

FORM 1120

_ ..ci:SCRIPTION

- REIMBURSEMENTS

TOTAL TO FORM 1120, LINE 10

FORM 1120

DESCRIPTION

FEES & LICENSES


OTHER INCOME

TAXES AND LICENSES

STATEMENT 1

AMOUNT

43,112.

43,112.

STATEMENT 2

AMOUNT

100.

100 .

{j)

CONTRIBUTIONS

CONTRIBUTION SUBJECT TO LIMITATION: CARRYOVER OF PRIOR YEARS UNUSED CONTRIBUTIONS

FOR TAX YEAR lilt 2,969 FOR TAX YEAR -FOR TAX YEAR -FOR TAX YEAR -FOR TAX YEAR 4lllt

TOTAL CARRYOVER CURRENT YEAR CONTRIBUTIONS

TOTAL CONTRIBUTIONS AVAILABLE TAXABLE INCOME LIMITATION AS ADJUSTED

EXCESS CONTRIBUTIONS

ALLOWABLE CONTRIBUTIONS DEDUCTION

TOTAL CONTRIBUTION DEDUCTION

2,969

2,969 0

2,969

STATEMENT 3

0

0

FORM 1120 OTHER DEDUCTIONS

~SCRIPTION

EMPLOYEE LEASING ADMINISTRATIVE SERVICES PROFESSIONAL SUPPLIES & EXPENSE RENT & UTILITIES EXPENSE ~LEASING EXPENSE

LEGAL & ACCOUNTING BANK CHARGES


NET OPERATING LOSS

LOSS PREVIOUSLY

TAX YEAR LOSS SUSTAINED APPLIED

12/31/. 26,517 . 7,592 .

NOL CARRYOVER AVAILABLE THIS YEAR

DEDUCTION

LOSS REMAINING

18,925.

18 ,925 .

SCHEDULE L OTHER CURRENT LIABILITIES

BEGINNING OF DESCRIPTION TAX YEAR

STATE TAX PAYABLE 1,775. DUE TO RELATED PARTY 29,068.

TOTAL TO SCHEDULE L, LINE 18 30,843.

STATEMENT 4

AMOUNT

12,736,082. 2,160,000 . 3,911,046. 2,700 ,0 00 . 6 ,330 ,6 08 .

368,525. 14,930.

399.

28,221,590.

STATEMENT 5

AVAILABLE THIS YEAR

18 ,92 5 .

18 ,925.

STATEMENT 6

END OF TAX YEAR

178,606.

178,606.

=orm 11205

3

U.S. Income Tax Return for an S Corporation IJJ> Do not file this fonn unless the corporation has filed or is

attaching Fonn 2553 to elect to be an S corporation. See Instructions.

Use IRS label. Otherwise, print or

--=-===-='-"'------1 type. : Check If Sch. M.J

attached 0 :; Is the corporation electing to be an S corporation lng with this tax year? Yes

H Check if: (1) 8 Final return (2) 0 Name change (3) 0 Address change

(4) Amended return (5) 0 S election termination or revocation

Gl E 0 u 5

i4 c 8 .. c E "' 2 .. i :>

~ :0 ii D

! !

Enter the number of shareholders who were shareholders during any part of the tax year

1a 2

3

4

5

7

8 9

10

11

12

13

14

15

16

Gross receipts or sales I 8 , 8 7 5 , 6 6 61 b less returns and anowances I 21 , 6 7 51 c Bal•

Cost of goods sold (Schedule A, line 8) . . . . . . . . . . . . . . . . . . ................................................... .

Gross profit. Subtract line 2 from line 1c ............ . ......... . _ ...... _ ... ___ ...... __ . __ ............ _ ...... _ .. .

Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) . .... __ . .. _ ...... .. _ ...... . ...... . .......... ..

Other income (loss) (see instructions-attach statement) ................. . ..... _ ... _ ... f? ~~ .. ~ ~ t_l}~ __ +. . . _ Compensation of officers . ... . ...................... . . . ..... . .................. . ....... . . . ......... . .. . ...... .

Salaries and wages (less employment credits) ..................•..............................................

Repairs and maintenance ..................... . .......................... ....... ........... ... .... •• _ ....... .

Bad debts ....................... . ................ . . . . . ........ . .........•...........•......•..... . •. . . ......

Rents ...................... • •... ................... • ........... . ......... ........... ........ .............. .

Taxes and licenses ................ _ ................•.......•................................................ Interest ....... . ..... . .. . .................. .. .. . .... . ... . ........... .. ... .. .... . . ......... . ..... . ... ... . . .. . .

Depreciation not cla imed on Schedule A or elsewhere on return (attach Form 4562) ......... _ ................... .

Depletion (Do not deduct oil and gas depletion.) .... .. ....... . ............................ _ ......... .... .... .

Advertising . _ . . .. . ..... .. .................. . ........ . ......•......... _ .. • .......................... . ....... •.

-

2

~ 17 4

Pension, profit-sharing, etc., plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. _ .. _ ....... · ..,._:""-+-------'::;..;;;-'-.;;..;;'-"'-

18 ) , , 19 )

l 20

Employee benefit programs

Other deductklns (attach stat~-~~~-t) .:::::::::: ::: ::::::::::::::: :::::::::::::::::::::: :~ ~~:: ~ ~ ~~ :: ?: :::: Total deductions. Add lines 7 through 19 ... _ ...... _ ... __ . . .... __ ........ _ .... ____ ... ____ .. .. . .... __ .. __ IJJ>

Excess net passive income or LIFO recapiLre tax (see inslructions) . . . . .... _ . . . ......... .

Tax from ScheduleD (Form 1120S) _ ................. _ .. _ ..................... .

c Add lines 22aend 22b (see insltuctions for edditionel taxes) ... __ ................ __ ...... ..

-estimated tax payments and - overpayment credited to 2008 ........... .

Tax deposited with Form 7004 . . . . . . . . . . . . . . . . . . . . . . . . .... . c Credit for federal tax paid on fuels (attach Form 4136) .......................... .

24d ::;:~~ ~:: =~~~~ <!: -~~~;~~;~~~~;.- c~~~ic·w ;:~~,;,· 222c; ;~ ~-~~h~·::::: :: ·: ·:::::: ·. ·::::::::::::: · · ~ ·o 25 .Amount owed. If line 23d is smaller than the total of lines 22c and 24, enter amount owed ....................... .

26 Overpayment. If line 23d is larger than the total of fines 22c and 24, enter amount overpaid . . . . . . . . . . . . . . . . . . . . .

27 Enter a from line 26 Credited to estimated tax IJJ>

iign I ere

Under penalties of perjury, I declare 1hat I have examined ltlls return, Including accompanytng schedules and statements, and to ltle best of my know1edge and belief, It 1$ tnJe, correct, and complete. Ded aradon of preparllf (other than taxpayer) l~ased on all Information of which preparer has any knowledge.

aid reparer's se Only

1r Privacy Act and Paperwork Reduction Act Notice, see separate Instructions.

Inventory at beginning of year

2 Purchases ..................... •. .. •..... .... •••• ..... ___ ..... . . _. ___ .•.•....•. _ ........ .. • •. ..... ••...•.. ... _ .

3 Cost of labor . . . . . . . . . . .................... _ ...................... _ ....•......•................................ 4

5

6

7

8

9a

Additional section 263A costs (attach statement) . ......................... . .....••. .. .......... . .............. .. ..

Other costs (attach statement) ................................... •• .................................. ~t:~~-. } . Total. Add lines 1 through 5 __ .......... ___ ...........................................•.......... _ . _ . .

Inventory at end of year ............................................. .. .............. _ ............. _ ......••.. _ .. Cost of goods sold. Subtract line 7 from line 6. Enter here and on page 1, line 2

Check all methods used for valuing closing inventory: (i) 0 Cost as describ~-i~· R~~i~ti~~~-~~~ii~~-1 :471~3· .. .

(ii) ~ Lower of cost or market as described in Regulations section 1.471-4

b

c d

( iii) D Other (Specify method used and attach explanation.) ~ ................................................ . ........ ........... .... ... ..... B Check if there was a writedown of subnormal goods as described in Regulations section 1.471-2(c) . . . . . . . . . . . . . . • . . . • • . . . • . . . . . • . . . . . . . . . . . . . . ~ Check if the LIFO inventory method was adopted this tax year for any goods (if checked, attach Form 970) . . . . . . . . . . . . . . . . • . . . . . . • . . . . . . . . . . . . . ~ If the LIFO inventory method was used for this tax year, enter percentage (or amounts) of closing

inventory computed under LIFO ............................... ... ................. ___ .......... _ .............. __

e If property Is produced or acquired for resale, do the rules of section 263A apply to the corporation? ........... . ..••............ ..

f Was there any change In determining quantities, cost, or valuations between opening and closing inventory? .... .. .. .. •.... • . . ....

1 Other (specify) ~ ... . ••...........•...............•.... .. 2 S ee the Instructions and enter the:

a Business activity ~ .... - -.. . . . . . . . . . . . . . . . . . . . . b Product or service ~ .. 3 At the end of the tax year, did the corporation own, directly or indirectly, 50% or more of the voting a domestic

corporation? (For rules of attribution, see section 267(c).) If "Yes," attach a statement showing: (a) name and employer

Identification number (EIN), (b) percentage owned, and (c) if 100% owned, was a QSub election made? ........ ... ..........•.........•..

4 Has this corporation filed, or is it required to file, a return under section 6111 to provide information on any reportable

transact.ion? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................ . ...........•..........

5 Check this box if the corporation issued publicly offered debt instruments with original issue discount . . . . . . . . . . . . . . . . . . . . • . . . . . • . . ~ 0 If checked, the corporation may have to file Form 8281, Information Retum for Publicly Offered Original Issue Discount

Instruments.

6 If the corporation: {a) was a C corporation before it elected to be an S corporation or the corporation acquired an

asset with a basis determined by reference to its basis (or the basis of any other property) in the hands of a

7

8

• • ~ Gl

E

j

C corporation and (b) has net unrealized built-in gain (defined In section 1374(d)(1)) in excess of the net recognized

built-In gain from prior years, enter the net unrealized built-in gain reduced by net recognized built-in gain from prior

years ............................................... _............................. . ...... _ .. ~ $ ......•.......... . ... Enter the accumulated earnings and profits of the corporation at the end of the tax year. $

Are the corporation's total receipts (see instructions) for the tax year and its total assets at the end of the tax year

Ordinary business income (loss) (page 1, line 21) .....................................•...... ••.. .........

2 Net rental real estate income (loss) (attach Form 8825) .................................................. ..

3a Other gross rental income (loss) ........................... ••. ...... •.. ...

b Expenses from other rental act.ivities (attach statement) ...... _ ....••....

c Other net rental Income (loss). Subtract line 3b from line 3a .........••••.......................•.....•....

4 Interest income ................................. . .......... . ..........................••................

5 Dividends: a Ordinary dividends . . . . . .. . . .. . . .. . .. .. . . .. . . . .. . .. . . .. .. . .. . .. .. . .. ......... ... ..... .. b Qualified dividends

6 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..•..................•.. 7 Net short-term capital gain (loss) (attach Schedule D (Form 1120S)) ...................... .. ............... .

8a Net long-term cepttal gain (loss) (attach Schedule D (Form 1120S)) .

b Collectibles (28%) gain (loss)

c Unrecaptured section 1250 gain (attach statement) ...•................•...

9 Net section 1231 gain (loss) (attach Form 4797) .................................................... ... .

Foon 11205

No

No

"' c 0

~ :I '0 • 0

11 Section 179 deduction (attach Form 4562) ................ .

12a Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................•...... . ~ ~!':\~ . ~ b Investment interest expense ................ . ....... •. ...............................•..................

c Section 59{e){2) expenditures (1) Type ..,. ................................ . .......... . ... {2) Amount ..,. d

13a Low-Income housing credit{sectlon 420)(5)) ................. ....... ..... . ........... . ................. ..

b Low-Income housing credit (other) .. ... ............... ........................... .. . .. ................. .

~ c Qualified rehabilitation expenditures (rental real estate) (attach Form 3468) ........ . •. ... .....•.. .. ........

1 d Other rental real estate credits {see instructions) . . . . Type IJJ> .....•••••..••••.•.••.•....•.... • .....•.•..•

u e Other rental credits {see instructions). . . . . . . . . . . . . . . Type IJJ> ...•••..••••..•..•..••...•..•.•...•.•.•....•

f Alcohol and cellulosic biofuel fuels credit {attach Form 6478) ............................................. .

148 Name of country or U.S. possession .... ................................................ . .. .. .. ...... .. .. .

b Gross income from aU sources .................•.........•.... • .... • ........................... •• ....... c Gross income sourced at shareholder level . . .. . . . . . . .. . .. •. .. ••. . . . • ........ . .. . .... . ... • . .. ...•. . ......

Foreign gross income sourced at corporate level

d Passive category . .... . . . .. .. ...... . .. .. ... . ... . .......•. . .. ... ......... • ............ •. ..... .••. .. •....

e General category . ............ .............. . . . .......................... •• ...........•........ •. .......

f Other (attach statement) ....................................•..................................•....... Deductions allocated and apportioned at shareholder level

g Interest expense ......................................................................•.•..... .........

h Other ........ . ......... ................... ............. ................... ...... ................... . Deductions allocated and apportioned at corporate level to foreign source income

Passive category . . ... ........ ..... .. ......... . .. ...... .. ..................... ........ . . •. ........... •.

General category . . ...........................•......... •. ... ......... . ...•.... . .......................

k Other (attach statement) ............. . ................. . . . ........ ........• . ............. ...... .. ...... Other information

Total foreign taxes (check one): ..,. 0 Paid 0 Accrued ........................... .. .......... ..

m Reduction in taxes available for credit (attach statement) . . . . . . ......................................... . n Other tax

15a Post-1986 depreciation adjustment ................................................................... . 1-~~----......:::...:::..L..:;::..:::..:. b Adjusted gain or loss ............................ .. .........................................•..........

c Depletion (other than oU and gas) ................ .. .............•........... . ... ........... ••... ........ d Oil, gas, and geothermal properties-gross income ......... • ...... •. . ...... . .. .. .. ........ ...••...... • ....

e Oil, gas, and geothermal properties-deductions .... . ..... .. ..................... .............. .......... .

g 17a Investment income .. . .. .. .. . .. . ... .. .. . .. ......................... .. .. = .! "' b Investment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . ....•..............•.........••...• _e o ,§ c Dividend distributions paid from accumulated earnings and profits ................. ..... ................. .

.5

c~ 8'i 18 Income/loss reconciliation. Combine the amounts on lines 1 through 10 In the far right ~!! column. From the result, subtract the sum of the amounts on lines 11 12d and 141

AA

18

Form 1120S.

Cash

2a Trade notes and accounts receivable

b Less allowance for bad debts .... ......... . .

3 Inventories ............................... .

<4 U.S. government obligations .............. .

5 Tax-exempt securities (see instructions) .. .. .

6 Other current assets (attach ctatemert) . . . ~ ~ !1:\ ~ . . ~ . 7 Loans to shareholders .................... .

8 Mortgage and real estate loans ............ .

9 Other investmerts (attach stillement) •.. .• •...•..•.••.

lOa Buildings and other depreciable assets ..... .

b Less accumulated depreciation ............ .

11a Depletable assets ........................ .

b Less accumulated depletion ..... • ..........

12 Land (net of any amortization) . . .......•....

13a Intangible assets (amortizable only) ........ .

b Less accumulated amortization ............. I <4 Other assets (attach statement) ................ .

15 Total assets ............................. ..

Uabilltles and Shareholders' Equity

16 Accounts payable ........................ . I 7 Mortgages, notes, bonds payable in less than 1 year

I 8 Other currenl Uebimes (attael'i s~atement) .. ~ ~ !1:\~ .. ~ . 19 Loans from shareholders .................. . 20 Mortgages, notes, bonds payable in 1 yeN or more

21 Other liabiUties (aiUich statement) .. . .......... . .

22 Capital stock .. .. ........... .. ............ .

23 Additional paid- in capital ... .•••. ...........

2<4 Retained earnings ........................ . 25 Adjustments to shareholders'

equity (attacn statement) ..................... .

Less cost of treasury stock . ............ . .. .

Note: Schedule M-3 reauired instead of Schedule M-1 if total assets are $10 million or more-see instructions

1 Net Income {loss) per books ... . .. ...... .. -502 368 5 Income recuded on books this yeer not included

2 Income Included on Schedule K, lines 1, 2, 3c, 4, on Schedule K,lines 11hrou!tJ 10 (itemize):

5a, 6, 7, Be, 9, end 10, not recorded on books this a T I!X-exempt interest s ························ ye~r ~temi2e): ......... ......... .... . ·············· ················· .......

3 Expenses recorded on books this year not 6 Deductions included on Schedule K. lines

induded on Schedule K, fines 1 through 12 1 through 12 and 141, not charged against

and 141 (itemize): book income this year {itemize):

a Depreciation $ .... .. ~9. , ~~). a Depreciation s .. ... . .. ·············· b Travel jlnd s ...... .. ..... ;I; 9. , . 9. ~-o. entet1a1nment ....... .. ........ ········ ········ ·· ········· .. ~~!1:\~ .. 7 ............. .. . ~. 6.1.~. ~- +. 84 492 7 Add lines 5 and 6

• Add lines 1 throuah 3 ... -417 876 8 Income Oossl (Sched~l~· K. n~~ 18i.' u~~· 4 ~~~ ~~~ .., .. -417 876 Analysis of Accumulated Adjustments Account, Other Adjustments Account, and Shareholders'

Balance at beginning of tax year .

2 Ordinary income from page 1, line 21

3 Other additions ...... ........ .......... ..

<4 Loss from page 1, fine 21 . . . . . . . .

5 Other reductions . .. ... ~ ~ m~ ~ . 6 Combine lines 1 through 5 . . . . . . . . . . . ...

7 Distributions other than dividend distributions

8

(c) Shareholders' undistributed taxable income pr!Mously taxed

~., .... Page 2 Listed Property (Include automobiles, certain other vehicles, cellular telephones, certain computers, and property used for entertainment, recreation, or amusement.) Note: For any vehicle for which you are using the standard mileage rate or deductin lease expense, complete only 24a 24b. columns a throu h c of Section A aU of Section B and Section C if a icable.

3ectlon A-Depreciation and Other lnfonnatlon (Caution: See the instructions for limits for passenger automobiles )

~4a Do voo have evidence to suooc rt lhe business/Investment use claimed? IXIYes I ( No 24b If "Yes • is the evidence written?

(a) (b) (c) (d) (e) (f) (g) (h) Type of property Date placed In Business/ Cost or other Basis for depreciation Recovery Method/ Depreciation Investment (list vehicles service

oerc'!~taoe basis (business/Investment period ConvenUon deduction first) use only)

!5 Special depreciation allowance for qualified listed property placed in service during the tax I year and used more than 50% in a Qualified business use (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

!6 Pro~~rll used more than 50% in a Qualified business use:

see St atement ~

% 120 396 88 480 4

%

!7

!8 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 .......... ............ .

Section 8--lnfonnatlon on Use of Vehicles

:omplete this section for vehicles used by a sole proprietor, partner, or other •more than 5% owner; or related person. f you pro...;ded vehicles to yol.l' employees, firstenswer the question& in Section C to see if you meet an exception to completing lhi& section for lho&e vehicles.

)0 Total business/investment maes driven (a) (b) (c) (d) (e)

XlYes i l No

(i) Elected

section 179 cost

Ei!~ !Jt, .. ~<~;l::~;·, ,r;1it .. l .l.l"1f. ~1'~~ ·~F~ )1'•·'·1. ··~;; t\:t~t;;!~.::l~

868

(f)

during the year (do not include commuting Vehicle 1 Vehicle 2 VeNcle 3 Vehlcle4 Vehicle 5 Vehlde6

miles) ........................................... 8 000 7 500 10 000 13 500 J1 Total commuting miles driven during the year ....... )2 Total other personal (noncommuting) mUes driven 1 500 .. )3 Total miles driven during the year. Add

lines 30 through 32 ............................... 8 000 7 500 10 000 15 000 )4 Was the vehicle available for personal Yes No Yes No Yes No Yes No

use during off-duty hours? . ....................... X X

)5 Was the vehicle used primarily by a

more than 5% owner or related person? .. ,,., ...... X X )6 Is another vehicle available for personal use? ...... X X

Section C-Questlons for Employers Who Provide Vehicles for Use by Their Employees

1.nswer these questions to determine if you meet an exception to completing Section B for vehicles used by employees who are

1ot more than 5% owners or related ersons see instructions .

Yes

17 Do you maintain a written policy statement that prohibits all personal use of vehides, including commuting, by your employees?

18 Do you maintain a written policy statement that prohibits personal use of vehicles, except commuting, by your employees?

19

10

See the instructions for vehides used by corporate officers, directors, or 1% or more owners ....... .

Do you treat all use of vehicles by employees as personal use? . . . . . . . . . . . . . . . . . . . . . . ..... .

Do you provide more than five vehldes to your employees, obtain information from your employees about

the use of the vehicles, and retain the Information received? ..... .............. . .... .......... ..................... . . . .....•. .

No Yes

Yes

11 Do you meet the requirements concerning qualified automobile demonstration use? (See instructions.) .......... , ........... •• .......

Note: If our answer to 37 38 39 40 or 41 Is "Yes." do not com fete Section B for the covered vehicles.

(a) Description of costs

(b) Date amortization

begins

(c) Amortizable

amount

(d) Code

section

(e) Amortization

period or percentage

(f) Amortization for

this yea..

No

No

X

X X

1 -2---Am--o_ro_·_za_t_~_n_o_f_oo_s_~ __ th-a-tb-----------L--------------~------------------~--------~-----r---+-----------------~ 13 Amortization of costs that began before your .. tax year . . . . . . . . . 43 \,J;/ t4 Total. Add amounts in column . See the Instructions for where to re ort . 44

Form

IAA

Federal Statements

Statement 1 - Form 1120S. Page 1, Line 5- Other Income

Description Miscellaneous income Finance charges & adjustments

Total

$

Amount 528

35,334

$ ___ 3_s ._, 8 .... 6_2

Statement 2- Form 1120S, Page 1, Line 19- Other Deductions

Description A~ arm Auto & truck expense Auto leases Bank charges Bankcard fees Dues & subscriptions Employee reimb - mileage & to Employee reimb - travel & lod Employee welfare (outings & a Equipment leases Injury/ER/driver testing Insurance Insura nce - group IT and tGchnical support Legal & accounting Office supplies OUtside services Payroll service fees Permi ts, fees & licenses Postage & freight Telephone Travel & lodging Uniforms Utilities Warehouse expense 50% of Meals & Entertainment

Total

$

Amount 848

93,642 17,318

9,632 18,486

6,277 15,388

5,397 1,856

16,975 290

51,606 134,894 16,545 57,429 27,753 12,729

4,867 4 ,941 9,231

59,320 5,632 6,269

28,628 6,614

19,030 631,597

1-2

Federal Statements

Statement 3- Form 1120S, Page 2. Schedule A. Line 5 ·Other Costs

Description outside services Freight Operating supplies Rent Taxes - payroll

Total

$

Amount 14,883

6,532 1,098

227,900 137,566

$ 387,979 --o::===io::-

Federal Statements

Statement 4- Form 1120S, Page 3, Schedule K, Line 12a- Contributions

Descri2tion

Cash Contrib Cash Cash Noncash Noncash Cap Gain Cap Gain 100% {Qualified) Contrib 50% Contrib 30% Contrib 50% Contrib 30% Pro2 30% Pro2 20% Total

Donations $ $ 1,320 $ $ $ $ $ $ 1,320

Total $ 0 $ 1,320 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,320

© 4

Federal Statements

Statement 5 • Form 1120S, Page 4, Schedule L. Line 6 • Other Current Assets

Bepinning End Descrietion o Year of Year

security deposit - rent $ 16,564 $ 16,564 Advances 102 12,500 Prepaid sales tax 68

Total $ 16,734 $ 29,064

Statement 6 ·Form 1120S. Page 4. Schedule L. Line 18 ·Other Current Liabilities

Bepinning End Descrietion o Year of Year

Security deposit - $ 300 $ 300 CUstomer deposits 201,692 35,123 Sales tax -72,860

Total $ 201,992 $ -37,437

Statement 7 ·Form 1120S, Page 4, Schedule M-1, Line 3 ·Expenses on Books Not on Return

Descrietion Insurance - officers' life Tax penalties

Total

$

Amount 26,293

38

$ __ ...,2_6_,_3_3_1

Statement 8 ·Form 1120S, Page 4, Schedule M-2, Line 5(a) ·Other Reductions

Descrietion Insurance - officers' life Tax penalties Disallowed Entertainment Exp Charitable Contributions

Total

$

Amount 26,293

38 19,030 1,320

$ ___ 4_6_,_6_8_1

Federal Statements

Regular Depreciation Statement 9 - Form 45621 Part v. Line 26 - Prol!ertv Used More Than 50% in Qualified

Business

(S

Property T~~e

Date in Busn Cost or Basis For

- Chevy

Service Use% Basis Depr Per Meth Deduct Sec 179

12/08/11 100.00 $ 17,067 $ 11,947 5.0 200DBMQ $ $ Toyota

11/21/ .. 100.00 21,500 21,500 5.0 200DBMQ 2,850

6/30/ . 100.00 20,000 20,000 5.0 200DBHY

3/21/ .. 90.00 61,829 35,033 5.0 200DBHY 2,018

Total $ 120,396 $ 88,480 $ 4,868 $ 0

9

Federal Statements

Schedule K-1. Box 16. Code C ·Nondeductible Expenses

Description Page 1 Meals/Entertainment Total

$

$

Amount 9,515

9,515

Form 1040 Label Use the L IRS ~ label. E Other- L wise, H please ~ print E or type. Presidential Election Campaign

Filing Status

Check only one box.

Exemptions If more than four dependents. see Instructions.

Income Attach Form(s) W·2 here. Also attach Forms W-2Gand 1 099-R If tax was withheld.

If you did not get a W-2, see instructions.

Enclose, but do not attach, any payment Also, please use Form 1040-V.

Adjusted Gross Income

1

2 3

6a

b c

d

7

Sa

b

9a

b

10

11

12

13

14

15a

16a

17

1S

19

20a

21

22

23

24

25

26

27

2S

29

30

31a

32

33

34

35

36

37

Cl'ledUng a box below wiU not change yoo~ tax et refund.

Check here if you, or your spouse if filing joinUy, want $3 to go to this fund (see instructions You Spouse

4 Head of household (with qualifying person). (See inst.) If

Married filing joinUy (even if only one had Income)

Married filing separatey.IE~r ¥s'ftS~ aWD

and full here. ld.. fiAr fi .I ll

qualifying person Is a child but not your dependent, enter

2

I Add numbers on I Total number of exemptions claimed • 0 ••• 0 ••••••••••• 0 ••••••••••••••• 0 •••• 0 •••••••• 0 •• linellbove ... 4 Wages, salaries, tips, etc. Attach Form(s) W-2

7 258,728 Taxable interest. Attach Schedule 8 If required ..................................

Tax-exempt interest. Do not include on line 8a . . . . . . . . [ Sb I Sa 27,272

Ordinary dividends. Attach Schedule 8 If required ................................ 9a 9,692 Qualified dividends (see instructions)....... . . . . . . . . . . I 9b .I 7, 4 61 Taxable refunds, credits, or offsets of state and local income taxes (see Instructions) ..... 10 7 Alimony received ......................................................... 11

Business income or (loss). Attach Schedule Cor C·EZ 0 ••••••••••• 0 ••••••••••••••• 12

Capital gain or (loss). Attach Schedule D if required. If not required. check here ... ... D 13 -3,000 Other gains or (losses). Attach Form 4797 ....................................... 14

IRA distributions ...... I ~:: I I b Taxable amount ••••••• 0 ••• 15b

Pensions and annuities 16b b Taxable amount ........... Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E ... 17 4,110 Farm Income or (loss). Attach Schedule F ....................... ............... 1S

Unemployment compensation ............................................... 19

Social security benefits ! 2oa I I b Taxable amount (see inst.) 20b

Other income. 21

Add the amounts in the far right column for lines 7 through 21. This is your total Income ..,. 22 296 809 Educatorexpenses(seelnstructions) ................. 23

Certain business expenses of reservists, performing artists,

and fee-basis government officials. Attach Fonn 210612106-EZ 24

Health savings accoun~~~YE n ~rYn"'\.T Moving expenses. Atta o . . . . . !lA vV~ .1. One-half of self-employment tax. Attach Schedule SE ... 27

Self-employed SEP, SIMPLE, and qualified plans ...... 2S

Self-employed health Insurance deduction (see lmtructJons) 29

Penalty on early withdrawal of savings ............... 30

Alimony paid b Rec•plenl's SSN ... 31a

IRA deduction (see instructions) .................... 32

Student loan interest deduction (see Instructions) ....... 33

Tuition and fees deduction. Attach Form 8917 ........ 34 6Y Domestic production activities ded. Attach Form 8903 .... 35

Add lines 23 through 31a and 32 through 35 ..... ..... .................... ...... 36 0 Subtract line 36 from line 22. This is your adjusted gross Income .................. ..,. 37 296 ,809

I

For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see Instructions. Form 1040 .. NA - 10401 TWF 27304 Copyright Forms (Software Only) .....

2 Form 1040

Tax and Credits 39a

Amount from line 37 gross income) .................................... ·,;-:-+-=:.=.-+---~:..::..:=....J.:....:::..-=-.:~ Check{ 0 You were born before January 2, 1944, 0 Blindl. Total boxes

Deduction for·· •People checked any box on line 39a, 39b, or 39c or who can be claimed as a dep., seeinst.

41

42

if: 0 Spouse was born before January 2, 1944, 0 BlindJ checked II>- 39a

b If ye<.~r spouse itemizes on a separate retum or you were a dual-status alien. see inst. and ch~k here 11>- 39 b

c Check If standard deduction includes real estate taxes or disaster loss (see inst.)

Itemized deductions (from Schedule A) or your standard deduction (see left margin) .... .

Subtract line 40 from line 38 .......... ..... . ... ........ .. .............. . . .. .... .

If line 38 is over $119,975, or you provided housing to a Midwestem displaced individual, see

instructions. Otherwise, multiply $3,500 by the total number of exemptions claimed on line 6d.

Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41 , enter -0- ..... .

Tax (see inst.). Check if any tax is from: a 0 Form(s) 8814 b 0 Form 4972 ........ .

•All others: Single or Married filing separately, $5,450

43

44

45

46

47

48

49

50

51

52

53

54 55

Alternative minimum tax(SeJThs)\lc~."'F)3cj\Fo~R· .. c·. o·. PY·. Add lines 44 and 45 .. . ... . .1 .1:"\.A..r. .t:\. . ~. D . . . . . . . . 11>- j.......:..:_+-----=-;:;....t...::....,=..::~ Foreign tax credit. Attach Form 1116 if required. . . . . . . . . . . . 47

Married filing jointly or Qualifying widow(er), $10,900 Head of household,

Other Taxes

Payments

Credit for child & dependent care expenses. Attach Form 2441 r--;--------------~

Credit for the elderly or the disabled. Attach ScheduleR .... .

Education credits. Attach Form 8863 ................... .

Retirement savings contributions credit. Attach Form 8880 ... .

Child tax credit (see instructions). Attach Form 8901 if required

Credits from Form: a W396 b 0 8839 ill5695

Other credits from Form: ao 3800 b ~ 8801 C u. Add lines 47 through 54. These are your total credits .................. ..... ....... .

56 Subtract line 55 from line 46. If line 55 is more than line 46, enter -0-

57 Self-employment tax. Attach Schedule SE .... .... .. ...... .. . ............... . ..... .

58 Unreported social security and Medicare tax from Form: a 04137 b 0 8919 ........ .

59 Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required ... . .

60 Additional taxes: a 0 AEIC payments b 0 Household employment taxes. Attach Schedule H

61 Add lines 56

62 Federal income tax withheld from Forms W-2 and 1099 .....

63 - estimated tax payments & amt. applied from 2007 return

~J~~~;;e a 64a Earned income credit {EIC) .. . .............. ..... . .. .

child, attach b Nontaxable combat pay election 64b ~--~------------Schedule EIC. 65 Excess social security and tier 1 RRTA tax withheld (see inst.)

66 Additional child tax credit. Attach Form 8812 ............. .

67 Amount paid with request for extension to file (see instructions) · 68 Credits from Form: a02439 bo4136 c08801 do88851--t---------i

69 First-time homebuyer credit. Attach Form 5405 ........... .

70 Recovery rebate credit (see instructions) ......... RRC .. . 71 Add lines 62 70. These are total

Refund 72 If line 71 is more than line 61 , subtract line 61 from line 71. This is the amount you overpaid

Direct 73a want refunded to If Form 8888 Is attached, check here. . . . . .,. 0

g~~~~i~i. .... b Routing no. Savings and fill in 73b, .,. d 73c and 73d, or Form 8888. 74

Account no.

Amt. of line 72

Paid Pre parer's Use Only

Firm's name (or yours if self-employed). address, & ZIP code

JVA • 10402 TWF 27305

20 848

75

SCHEDULES A&B (Form 1040)

Schedule A·· Itemized Deductions

Taxes You Paid (See instructions.)

Interest You Paid (See Instructions.) Note. Personal Interest is not deductible.

Gifts to Charity

If you made a gift and got a benefit for it, see instructions.

by others.

2 Enter amount from Form 1040, line 38 ..

3 Multiply line 2 by 7.5% (.075) .... .. . ... . . .................. .

4 Subtract line 3 from line 1. If line 3 is more than line 1, enter ·0· .... .

7 Personal property taxes

8 Other taxes. ~ --........................................................................... .....

9 Add lines 5 8 ................. . .. .. . . . 10 Home mortgage interest and points reported to you on Form 1098 ..

11 Home mortg. int. not reported to you on Form 1098. If paid to seller,

show that person's name, ID no., & addr. ~ ................................... _

12 Points not reported to you on Fm. 1098. See inst. for special rules ..

13 Qualified mortgage insurance premiums (see instructions) . . . ... . .

14 Investment interest. Attach Form 4952 if required. (See instructions.)

15 Add lines 10 14 ... .. . ............................. .

16 Gifts by cash or check. If you made any gift of $250 or more,

see instructions VAR . CASH.~C~O=N=T=R=I=BUT==x=o~N=---------~2~0~

17 Other than by cash or check. If any gift of $250 or more, see

instructions. You must attach Form 8283 if over $500 ........... .

18 Carryover from prior year . ..... ...... ..................... .

19 Add lines 16 18 ........ . .......... .

Casualty and Theft Losses 20 Attach Form 4684.

Job Expenses and Certain Miscellaneous Deductions

21 Unrelmbursed empl. exp. You must attach Form 2106 or 2106·EZ if required

~ FORM 2106 95,993

22 Tax preparation fees .................. . ..•...............

23 Other expenses~-----------..,.-.,........------, ......................... --::,.---::-::~

1

16

261 4 0

9 29 84

15

2 0

253

19 4

20 0

(See instructions.)

24

25

FROM SCHEDULE rrA:*PA y~ r~=-~:::-:;;~-=-=~

Total Itemized Deductions

29 Is Form 1040, line 38, over $159,950 (over $79,975 if married filing separately)?

0 No. Your deduction is not limited. Add the amounts in the far right column }

for lines 4 through 28. Also, enter this amount on Form 1040, line 40. . .....

~ Yes. Your deduction may be limited. See instructions for the amount to enter.

30 If eJect to itemtze deductions even though they are tess than your standard deduction. check here ~

For Paperwork Reduct ion Act Notice, see Form 1040 instructions.

JVA • AB 12 TWF 27042 Copyright Forms (Software Only)·-...

Schedule A (Form 1040)_...

if shown on other side.

ule B •• Interest and Ordinary Dividends Sequence No. 08

1 List name of payer. If any interest is from a seller-financed mortgage and the buyer used

the property as a personal residence, see Instructions and list th is interest first. Also, show Amount

Part I Interest (See the Instructions for Form 1040,1ine 8a.)

that

Note. If you 1 received a Form 1099-INT, Form 1099-0 ID, or substitute statement from a brokerage firm, list the firm's name as the payer and enter the total interest shown on that

6 40 21

204 57 54

26 890

form. 2 Add the amounts on line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1--2--il----..;;;;2'-7_._""2_7....;;2;;.._ 3 Exdudable interest on series EE and I U.S. savings bonds issued after 1989.

Attach Form 8815 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3~1-----:-::=---,:-::,....,....-4 Subtract line 3 from line 2. Enter the result here and on Form 1040, line 8a . . . . . . . . . . . II> 4 2 7 2 7 2 Note. If line 41s over $1,500, Amount

Part II Ordinary Dividends (See the instructions for Form 1040, line 9a.)

Note. If you received a Form 1099-DIV or substitute statement from a brokerage firm, list the firm's name as the payer and enter the ordinary dividends shown on that form.

5

5

TAXPAYER €8PY 6 Add the amounts on line 5. Enter the total here and on Form 1040, line 9a . . . . . . . . . . . II> 6

o e. 1ne s over . • you mus complete art N t If I' 6 I $1 500 t I P Ill

Part Ill You must complete this part If you (a) had over $1,500 of taxable interest or ordinary dividends; or (b) had a foreign account; or (c) received a distribution from, or were a grantor of, or a transferor to, a foreign trust.

Foreign 7a At any time during - did you have an interest in or a signature or other authority over a financial account Accounts In a foreign country, such as a bank account, securities account, or other financial account? See instructions and Trusts for exceptions and filing requirements for Form TO F 90-22.1 ......................................

(See b If "Yes." enter the name of the foreign country II>

Instructions.) 8 During .. did you receive a distribution from, or were you the grantor of, or transferor to, a foreign trust?

If "Yes," you may have to file Form 3520. See Instructions ........................................

498 8 176

412 606

9 692

Yes No

X

X For Paperwork Reduction Act Notice, see Form 1040 Instructions.

JVA ~1 A8120 TWF 27043 Copyright Forms (Software Only) ....

Sohedule B (Fom> 1040)~

SCHEDULE D (Form 1040) Capital Gains and Losses

11> Attach to Form 1040 or Form 1040NR. 11> See Instructions for Schedule 0 (Form 1040).

11> Use Schedule D-1 to list additional transactions for lines 1 and 8.

Short-Term Capital Gains and Losses -- Assets Held One Year or Less

(a) Description of property 1 (Example: 100 sh. XYZ Co.)

SCHEDULE A- A3 ATTAC

2 Enter your short-term totals, if any, from Schedule D-1 ,

(c) Date sold (Mo., day, yr.)

(d) Sales price (see instructions)

486

(f) Gain or (loss) Subtract (e) from (d)

17

line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t-'2~r-------+------+--------3 Total short-term sales price amounts. Add lines 1 and 2 in

column (d) ....... . ............... . ... .. . . ........ . ....... . 3 1 503 4 Short-term gain from Form 6252 and short-term gain or (loss) from Forms 4684, 6781, and 8824 .. . ......... . 4 -318 5 Net short-term gain or (loss) from partnerships, S corporations, estates, and trusts from

Schedule(s) K-1 . . ..... .......... . . . ........ ... . . . ..... .. . .... .. . . . .. . . . ................. . . 5 -3 633 6 Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss

Carryover Worksheet In the instructions . . .. .. .. ................... . ........................... . 6 6 969

7 Net short-term capital gain or (loss). Combine lines 1 through 6 in column (f) ..... . . . . .... . ............ . 7 -10 903

I Part II I Long-Term Capital Gains and Losses- Assets Held More Than One Year

(a) Description of property (b) Date acquired (c) Date sold (d) Sales price ( ~! c.;ost or (f) Gain or ( loss) (Example: 100 sh. XYl Co.) (Mo., day, yr.) (Mo., day, yr.) (see instructions)

other basis Subtract (e) from (d) 8 (see instructions) SCHEDULE A- A3 ATTACHE p

~IOUS ~IOUS 70 354 65,226 5 128

9 :~e~ ~~~~~~~g.-~~~ ~~t~~~· .i~ ~~~·. ~~~. ~~~T.~XPAY E RCOI >y 10 Total long-term sales price amounts. Add lines 8 and 9 in

column. (d) ...... . ... ....... ....... . . . ...... . . ... . . . ....... . 10 70 354 11 Gain from Form 4797, Part I; long-term gain from Forms 2439 and 6252; and long-term gain or

(loss) from Forms 4684, 6781 , and 8824 ... .. ..... . ........................ . . . .... ••••••• 0 •• • •••• 11 -477

12 Net long-term gain or (loss) from partnerships, S corporations, estates, and trusts from

Schedule(s) K-1 . .. . ............ . ...... . . . . . .. . .. . ................... .. ..... . ............... 12 -1 633

13 Capital gain distributions. See the instructions ..... ......... •••••••• 0 • • • • •••• • •••• 0 ••••••••••••••• 13

14 Long-term capital loss carryover. Enter the amount, if any, from line 13 of your Capit al Loss

Carryover Worksheet in the Instructions .......... . ... . .... . ............ . .. ... .. .. . . ..•......... ·. 14 ( 638 )

15 Net long-term capital gain or (loss). Combine lines 8 through 141n column (f). Then go to

Part Ill on page 2 ....... . .. ..... . . . . .... . .. . . ..... . ... . ... . .. . . ...... . .. ............ .. ..... . 15 2 380 For Paperwork Reduct1on Act Notice, see Form 1040 or Form 1040NR Instructions.

JVA . 01 TWF 27034 CopY"'ght Foms (Software Only) • .-.

Schedule 0 (Form 1 040)~

2

Summary

16 Combine lines 7 and 15 and enter the result • 0 •••••••••• • • •• •• 0 ••••••• 0 . 0 0 •••••••••• • ••••••••• 16 -8,523

If line 16 is:

• A gain, enter the amount from line 16 on Form 1040, line 13, or Form 1 040NR, line 14. Then go to line 17 below.

• A loss, skip lines 17 through 20 below. Then go to line 21. Also be sure to complete line 22.

• Zero, skip lines 17 through 21 below and enter -Q- on Form 1040, line 13, or Form 1 040NR, line 14. Then go to line 22.

17 Are lines 15 and 16 both gains? TAXPAYER COPY 8 Yes. Go to line 18. No. Skip lines 18 through 21 , and go to line 22.

18 Enter the amount, If any, from line 7 of the 28% Rate Gain Worksheet In the instructions ..... .. ... .... ... 18

19 Enter the amount, if any, from line 18 of the Unrecaptured Section 1250 Gain Worksheetin the instructions .,. 19

20 Are lines 18 and 19 both zero or blank?

0 Yes. Complete Form 1040 through line 43, or Form 1 040NR through line 40. Then complete the

Qualified Dividends and Capital Gain Tax Worksheetin the Instructions for Form 1040 (or in the

Instructions for Form 1040NR). Do not complete lines 21 and 22 below.

0 No. Complete Form 1040 through line 43, or Form 1040NR through line 40. Then complete the

ScheduleD Tax Worksheet In the instructions. Do not complete lines 21 and 22 below.

21 If line 16 is a loss, enter here and on Form 1040, line 13, or Form 1040NR, line 14, the smaller of:

• The loss on line 16 or } ... .. .. .... ........ .. .. .... .. .. .. . 21 ~ 3,000 )

• ($3,000), or if married filing separately, ($1 ,500)

Note. When figuring which amount Is smaller, treat both amounts as positive numbers.

22 Do you have qualified dividends on Form 1040, line 9b, or Form 1040NR, line 10b?

~Yes. Complete Form 1040 through line 43, or Form 1040NR through line 40. Then complete

the Qualified Dividends and Capital Gain Tax Worksheetin the Instructions for Form 1040

(or in the Instructions for Form 1040NR).

0 No. Complete the rest of Form 1040 or Form 1040NR.

JVA TWF 27035 Copyright Forms (Software Only) • ..... ScheduleD (Form 1040)_..

TAXPAYER COPY

Attachment .. .. - .. .... ~ .. shown on page 1 .

0 - f .. " .. e k " e e " e e ' I I • :. I '' • mounts shown on Schedule(s) K-1.

I Part Il l Income or Loss From Partnerships and S Corporations Note. If you report a loss from an at-risk activity for which any amount is not at risk, you must check the box in column (e) on line 28 and attach Form 6198. See instructions.

27 Are you reporting any loss not allowed in a prior year due to the at-risk or basis limitations, a prior year unallowed

loss from a passive activity (if that loss was not reported on Form 8582), or unreimbursed partnership expenses?. . . . . . 0 Yes ~No If answered .. Yes: see the instructions before l'.nrnn'"'"'n

(h) Nonpasslve loss from Schedule K·1

30 Add columns (g) and 0) of line 29a ......................................................... .

31 Add columns (f). (h), and (i) of line 29b ...................................................... .

32

33 (a) Name

(d) Passive income from Schedule K·1

(e) Deduction or loss from Schedule K·1

35 Add columns (d) and (f) of line 34a ......................................................... .

36 Add columns (c) and (e) of line 34b ........................................................ .

37 Total estate and trust Income or (loss). Combine lines 35 and 36. Enter the result here and

Net farm rental income or (loss) from Form 4835. Also, complete line 42 below ................... . ... .

41 Total income or (loss). Combine lines 26, 32, 37, 39, and 40. Enter the result here and on Form 1040,

32

U) Nonpassive income from Schedule K·1

(b) Employer identification number

(f) Other Income from Schedule K·1

42 line 17, or Form 1040NR, line 18 .................................... ··,:.·...:.·.:...· .:...c· ·:...:·...:.·.:..·.:..· :...;· ·...:.·.:..·.:...;· :...;· ·...:.·.:..·.:..· _..::~-~4...;.1--'-____ 4.::..J...::.;=-=~ Reconciliation of farming and fishing lncome.Enter your gross farming

43

and fishing income reported on Form 4835, line 7; Schedule K-1 (Form 1065), box 14, code B: Schedule K-1 (Form 1120S), box 17, code T; and Schedule K-1 (Form 1041),1ine 14, code F (see instructions)............. r-4_2_._ _______ --i

Reconciliation for real estate professionals. If you were a real estate professional (see Instructions), enter the net Income or (loss) you reported anywhere on Form 1040 or Form 1040NR from all rental real estate activities wh~lch~~~~~~~~~~~~~~

E2 Schedule E (Form 1040)-

# 1

25 Description of properties (show type, location, and date acquired for each property). Use a separate line for each property lost or damaged

from the same REV PROC 2 0 0 9-2 0

26

27

28

29 30

31

32

33

Property A

Property B

Property C ===-;.....:_----'-.:.=== Property 0

Cost or adjusted basis of each property .T~~I Insurance or other reimbursement (whether or not

you filed a daim). See the instructions for line 3 .... 27

Note: If line 26 is more than line 27, skip line 28. Gain from casualty or theft. H line 27 Is more than line 26, enter the difference here and on line M or line 40, column (c), except as provided In the Instructions for line 39. Also, skip Unes 29 tnrough 33 fe< that COlumn. See the il1struet1011s for lne 4 if line 27 includes insurance or other reimbursement you did not daim, or you received payment for your loss in a later

28 tax year ••••••••••••••••••• 0 ••••••••• 0 •••••

Fair market value before casualty or theft ........ 29 Fair market value after casualty or theft ......... 30

Subtract line 30 from line 29 ••••••••••• ' ••••• 0 31

Enter the smaller of line 26 or line 31 ........... 32

Note: If the property was totally d.,troyed by casualty or lost

from theft. enler on line 32 the amount from line 26.

Subtract line 27 from line 32. If zero or less. enter -0- 33

Properties

~A "W"Dl ll r "V ,n t'\T c rl. ~ Dl 1\.. vv~ ~

97,964 34 Casualty or theft loss. Add the amounts on line 33. Enter the total here and on line 35 or line 40 (see Instructions) I 34

I Part II I Summary of Gains and Losses (from separate Parts I) {b) Losses from casualties or thefts

(a) Identify casualty or theft (i) Trade, business, (ii) tncorne-

rental 0< royally prodiiCing and propeny employee property

0

97,964 (C) Gains from

casualties or thefts

lndudobleln Income

36 Totals. Add the amounts on line 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . L.:3:..:6:...1..\ _____ --1.)W(:..-___ r---!.+-------37 Combine line 36, columns (b)(l) and (c). Enter the net gain or (loss) here and on Form 4797, line 14. If Form 4797

Is not otherwise required, see Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ~3:...:.74 ______ _ 38 Enter the amount from line 36, column (bXii) here. Individuals, enter the amount from income-producing property

on Schedule A (Form 1040),1ine 28, or Form 1040NR, Schedule A, line 16, and enter the amount from property used as an employee on Schedule A (Form 1040), line 23, or Form 1040NR. Schedule A, line 11. Estates and trusts, artnershi s, and S cor rations, see instructions . . . . . . . . 38

39

40

41 Total losses. Add amounts on line 40, col

42 Total gains. Add lines 39 and 40, column (c)

43 Add amounts on line 41 , columns (b)(l) and (b)(ii) ................................................ .

44 If the loss on line 43 is more than the gain on line 42:

JVA

a Combine line 41 , column (b)(l) and lone 42, 1nd enter the net gain or (loss) here. Pa11ne11hlps (except electing large partnerships) end S corporati011s, see tne note below All others, enter this amount Oil Form 4797, line 14. If Form 4797 os not otherwise required, see nslt

b Enter the amount frcm ~ne 41. column (b)(li) he<e lndilliduals, enter Ire amount from oncome-producing property oro Schedu'e A (Form 1040), line 28. 0< Form 1040NR. Schedule A. line 16, and entM the a'!lount from proj)etty used as an employee on Schedule A (Fonm 1040), ~ne 23, 0< Form 1040NR. Schedule A, line 11. Estates and trusts, enter 011 the "Other deduetlons" ~ne of your tax retum. Partners ~'lops (except electlngllrge partnerships) and S corpe<ations, see the note below Electing large partnershtps enter on Form 1065-B, Pan II. line 11 •.••.••••..•••••••.•.••..••••••.•.• , .••• , , . • • • • . • • • • . •••• , ..••..•.

TWF27077 Copynght Forms (Software Only) __,

44a

44b 964

Form

Form 4562 Depreciation and Amortization (Including Information on Listed Property)

Note: If you have any listed property, complete Part V before you complete Part I.

1 Maximum amount. See the instructions for a higher limit for certain businesses ........... .... . . .......

2 Total cost of section 179 property placed in service (see Instructions) ...............................

3 Threshold cost of section 179 property before reduction In limitation (see Instructions) .... .... ...........

4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0-0 ••••••••••••••••••••••••••

5 Doll~r limita.tion for tax year. Subtract line 4 T~P. .:f\. T.E~~O.~Y see mstructrons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 (a) Description of property (b) Cost (busn. use only) (c) Elected oost

7 Listed property. Enter the amount from line 29 ............................ I 7

8 Total elected cost of section 179 property. Add amounts In column (c), lines 6 and 7 ... . ................ 9 Tentative deduction. Enter the smaller of line 5 or line 8 ... . .............................. ... ... .

10 Carryover of disallowed deduction from line 13 of your - Form 4562 . .... . . .. ........... . ... . ....

11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions)

12 Section 179 expense deduction. Add lines 9 and 10, but do not enter more than line 11 ................. 13 Carryover of disallowed deduction to •. Add lines 9 and 10, less line 12 ... .,.. I 13

Note: Do not use Part II or Part Ill below for listed property. Instead, use Part V.

OMB No. 1545-0172

1 250,000 2

3 800 000 4 0

5 250_LOOO

8

9

10

11 2501000 12

lPart 11 1 SQ_eclal DeQ_reciation Allowance and Other Depreciation (Do not indude listed property.) (See instructions.) 14 Special depreciation allowance for qualified property (other than listed property) placed in service

during the tax year (see instructions) . . ................. . .......... . . . .... . ... . ...... . . . ..... 14 15 Property subject to section 168(f)(1) election ......................................... . .... . ... 15 16 Other depreciation (induding ACRS) ............................. .... ............ .. . .. ... . .. 16 56,818 I Part 1111 MACRS Depreciation (Do not indude listed property.) (See instructions.)

Section A

17 MACRS deductions for assets placed in service in tax years beginning before- . . . . . . . . . . . . . . . . . . . . 17 ~--~---------------18 If you are electing to group any assets placed in service during the tax year into one or more

general asset accounts, dheck here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . It> Section 8- Assets Placed In Service During .. Tax Year Using the General Depreciation System

(a) Classification of property (b) Month and (c) Basis for depr. {d) Recovery (e) (f) Method (g) Depredation year placed in (buslnessnnvestment use period Convention deduction service onrv- see rnsti'IJcUons)

19a 3-year property

b 5-year property

c 7-year property

d 10-year property

e 15-year property

f 20-year property

g 25-year property 25 yrs. S/L

h Residential rental 'T A vn A"' I/ g >ot'rJ· r-'1An ~TSIL property .l i"""l.L)...l ~ .l.i6ll~ ._...w .1- .l S!L

I Nonresidential real 39 yrs. MM S/L property MM S/L

Section C -Assets Placed In Service During .. Tax Year Using the Alternative ~vt-• wv•~••v System

20 a Class life S/L

b 12-yE)~ 12 yrs. S/l c 40-year 40 yrs. MM S/L

I Part IV I Summary (See Instructions.)

21 Listed property. Enter amount from line 28 ................................ ................... 21 22 Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21 . Enter here

and on the appropriate lines of your return. Partnerships and S corporations- see instructions .......... 22 56,818 23 For assets shown above and placed In service during the current year, enter the

I 23 I portion of the basis attributable to section 263A costs .. .. . . . ' . ... . ... . ... For Paperwork Reduction Act Notice, see separate Instructions. Form 4562 JVA 5621 TWF!7117 Copynghl Forms (So!t..,are O"'y) -

JVA

~ETAIL STATEMENTS

STATEMENT #1 - HOME MORTGAGE INT AND POINTS (SCHEDULE A LINE 10)

21 , 637 7,895

224

TOTAL CARRIED TO SCHEDULE A LINE 10 . . .. . . ........ ...... .. . .

STATEMENT #2 - OTHER T~~ ¥~£QR~ 3)

AIRPLANE HANGER [TAXPAYER] ... .. . . . .. .... . . .... . CHARTS, SUPPLIES [TAXPAYER] ... ... .. . . .... .. . .. . INSURANCE [TAXPAYER] .. .... . . ... . . . . . . . ... . . ... . MAINTENANCE/FUEL [TAXPAYER] . ... . .... .. .. . .... . . MAINTENANCE/INSPECTION [TAXPAYER] . . .......... . . TRAINING [TAXPAYER] .. .... ..... .. ... . . . .. .... . . . ENGINE RE-BUILD [TAXPAYER] . . ........ ... ..... .. . SUBSCRIPTIOND/NAV DATA [TAXPAYER] ... ... ....... .

5,193 137

4,313 6,833 4,565 1,643

35,033 1,401

TOTAL CARRIED TO FORM 2106 #1 LINE 3 .... ... . .. ... ...... ... .

TAXPAYER COPY

Cooynght Forms (Soflwa•e O"IY) - - C07030

PAGE 1

29,756

59,118

Form 2106 Employee Business Expenses ..,. See separate instructions.

Employee Business Expenses and Reimbursements

Step 1 Enter Your Expenses

1 ~::;i:~~.~~~~ ~r~~ ~i~~ .~2.~ ~~ l.i~~ ~.9: ~T.1.!XP..i\. 2 Parking fees, tolls, and transportation, Including train, bus, etc., that

expenses

ColumnA

Other Than Meals and Entertainment

COPY did not involve overnight travel or commuting to and from work . . . . . . . . 2 r-_, ______________ ~

3 Travel expense while away from home overnight. including lodging,

airplane, car rental, etc. Do not Include meals and entertainment . .. ... . 3 5 4 Business expenses not included on lines 1 through 3. Do not include

meals and entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t-4.;,_+----..::;,..,;"-'-~~-1

5 Meals and entertainment expenses (see instructions) ..... . ...... .. .. . 6 Total expenses. In Column A, add lines 1 through 4 and enter the

result. In Column B, enter the amount from line 5 .... , .. .. .. . .. ... . . . 6 115 936

Note: If you were not reimbursed for any expenses in Step 1, skip line 7 and enter the amount from line 6 on line 8.

Step 2 Enter Reimbursements Received From Your Employer for Expenses Listed in Step 1

7 Enter reimbursements received from your employer that were not reported to you In box 1 of Form W-2. Include any reimbursements

reported under code " L • in box 12 of your Form W-2 (see

instructions) .................. .. .... . ....... . ... ... ......... 7 19 , 943

Step 3 Figure Expenses To Deduct on Schedule A (Form 1040 or Form 1040NR)

8 Subtract line 7 from line 6. If zero or less, enter -0-. However, if line 7 is greater than line 6 in Column A, report the excess as Income on

Form 1040, line 7 (or on Form 1040NR, line 8) . . ..... . . .. . ... .. . . .. .

Note: If both columns of line 8 are zero, you cannot deduct

employee business expenses. Stop here and attach Form 2106

to your return.

9 In Column A , enter the amount from line 8 ,....'11'~ ·,..-~

50% (.50). (Employees subject to Oepa

of service limits: Multiply meal expenses incurred while away from home on business by 80% (.80) instead of 50%. For details, see instructions.) .... .

8 9

COPY 9 95 993

10 Add the amounts on line 9 of both columns and enter the total here. Also, enter the total on

Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 9).(Reservists, qualified performing artists, fee-basis state or local government officlals, and Individuals with disabilities:

See the instructions for rules on where to enter the total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..,. 1 0

For Paperwork Reduction Act Notice, see Inst ruct ions.

1 ••nrraru • •• u go .. n a 7

Column B

Meals and Entertainment

Form

0

SCHEDULE E (Form 1040)

Income:

Supplemental Income and Loss (From rental real estate, royaltiesL..I,artnerships,

S corporations, estates, trusts, REMICs, etc) ... Attach to Form 1040 1040NR, or Form 1041 • ... See Jnst11.1ctions for Schedule E (Form 1040).

y clol

Note. If you are In the business of

... . . . ....

or loss from Fonn 4835 on 2,1ine 40. 2 For real

property listed on line 1, did you 01' your family use it during the tax year fOI' personal purposes for mOI'e than the greater of: • 14 days, or • 1 0% of the total days

rented at fair rental value? · (See instructions.)

•r

se

3 Rents received ...................... t--=~---..::...:"'-":.;:;..:~,___ __ ..=.:::...t...:::..;:.;:;..:...!---__;::...<......:..:;..:...:..+-=-1---__;:::..::..c.....:..=....:.....:...

5 Advertising ..•.........••.•••........ ~--=~-------i-------1------_:;...:...:.. 6 Auto and travel (see instructions) ..... 1---::--t-------i-------+--------7 Cleaning and maintenance. •..•.•.•... t--::--t-------l-------!-------8 Commissions ..••...•• ••.. •.......... ~--=~-------:::-:-::--i-------+------=-=-=-9 Insurance. ........ ... .... . .........•. ~:o--1----__;:....::..;~1-------+-----~-=-=-

10 legal and other professional fees ..... 1-::-~-------t-------+------:;;...;;....:.. 11 Management fees .................... f--!-=.......t-------i-------1-------12 MortQage interest paid to banks, etc

(see anstructions) .. .. .. .. . .. . . . .. .. .. t-..:..::--t----3=-<-7..:...;:.8.=.1~. +---.-=..::::..<...:::.:::.:~1------=CL-:-=;..:. 13 Other interest. ........ . .......... •... t-::-~,.....-------t------::---c=-..--+-------14 Repairs. . .. ..... ...•... ... . . ...•..... ~:!.....l'-------l-----=::.t..:::.::..::...:.+-------15 Supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ~:--t-----=--=-=-+----=--==-=-+----:::---:-::::-:-16 Taxes . . .............. . .............. t-::-::-l-----';.o..;;::.:::.:~I---__;:;.L..;:::..::...::...:.+----.:::..t...::...:~ 17 Utilities .......•......•.... ... ........ t-'-"'--!-------t-------+-------18 Other (list)~ ___________ _

18

19 Add lines 5 through 18 .............. . 20 Depreciation expense or depletion

(see instructions) ................... . 21 Total expenses. Add lines 19 and 20 . . r'-t---.;;::.;;:'-'-';._:_:...:..<t---...::..:::..t.."-"-.;;...:;.+---....;;;.~..:...:c.::.....:... 22 lnc!lme !lr (l!lss) from rental real estate or

royalty properties. Subtract line 21 from line 3 (ren~) or line 4 (royalties). If the result Is a (loss), see instructions to find out if you must

file Fonn 6198 .....•.............. ... .. . t-='-+---=1~6~....4""'1=-0::....:...t. ---...::...f...::...:;..::;...:;+------".:...;:.~ 23 Deductible rental real estate lllSs.

Caution. Your rental real estate loss on line 22 may be limited. See instructions to lind out if ycu must file Form 8582. Real estate professionals must complete line 43 on page 2. .. .. . . . . .. .. - 6 53 6 .

24 Income. Add positive amounts shown on line 22. Do not include any losses . .. .... . . .... .. ... . . ... . .. ... . . ~~1------=~I-;:~,..:... 25 Losses. Add royalty losses from line 22 and rental real estate losses from line 23. Enter total losses here ... 1-==-i-------=::.:..t...::..::.:~ 26 Total rental royalty income or (loss). Combine lines 24 and 25. Enter the

result here. and line 40 on page 2 do not apply to rou, also enter this amount on or Form 1040NR, line 18. Otherwise, mclude this amount

total ........ NP.A ..... ........ .. ... 9 .87.4. BAA For Paperwork Reduction Act Notice, see instructions. FDIZ230lt - Schedule E (Form I

@

Schedule K-1 'Form 11205) )apartment of the Treasury ntemat Revenue Service

... ~~~~~~~3m~~~ For calendar year. or tax year beginning _____ _

ending. _____ _

Shareholder's Share of Income, Deductions, 2 Net rental real estate lnoome (loss)

Credits, etc. • See back offonn and aeparate lnstructiona. 3 Other net rental income Ooss)

4 Interest Income

5a Ordinary di'Jidends

5b Quafified dMdends 14 Foreign transactions

6 Royalties

7 Net short-term capital gain {loss}

8a Net long-term capital gain Ooss)

8b Collectibles (28%) gain (loss)

8c Unreceptured section 1250 gain

9 Net sec1lon 1231 gain (loss)

10 Other income (loss) 15 A/temative minimum tax (AMT) items

F Shareholder's percentage of stock 0\M'lershlp for tax year ........... . .. ... ..... .. so . 000000%

11 Section 179 deduction 18 Items affecting sha,rahc>lder

C* 12 Other deductions

A 660

17 Other information

* See attached statement for additional information.

or Paperwork Reduction Act Notice, see Instructions for Form 11205. Schedule K-1 (Form 11208.

AA @

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Examining and Using Financial Statements to Identify Issues · 2018. 1. 4. · » No Balance Sheet » Cash » Accounts Receivable, Accounts Payable, Inventory, Other Assets and Other