It’s a Partnership Tax Return Project.

It’s a Partnership Tax Return Project.

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Adam Ant 421 Brickell Avenue #1420 Miami, FL 33131 (S.S. # 987-65-4321), Bob
Builder 1111 Biscayne Boulevard Miami, FL 33131 (S.S. # 876-54-3210) and Clark
Carter 121 Ocean Drive Miami Beach, FL 33149 (S.S. # 765-43-2109) formed the equal
ABC Partnership on January 1, 2012.
-Its employer identification number is 59-3456789.
-Its address is 456 Brickell Avenue Miami, FL 33131.
-ABC operates a computer retail store.
-Bob is a computer genius and will be the brains behind the operation.
-Adam and Bob each contributed cash of $120,000 and Clark contributed property worth
$160,000 with a basis of $100,000 and subject to a mortgage of $40,000.
-ABC is a cash basis taxpayer, although they use the accrual method for book purposes.
In their first year of operations they had the following activity for tax purposes (cash
basis):
Sales Revenue
$420,000
Purchases of inventory
$175,000
Ending inventory
$45,000
Depreciation
$30,000
Section 179 expenses
$25,000
Salaries
$42,000
Guaranteed payment to Bob
$12,000
Purchases of equipment
$152,000
Rent expense
$21,000
Interest income
$5,000
Mortgage interest expense
$1,250
Dividend income
$1,000
Notes:
1.
Depreciation for book purposes was $20,000 and $30,000 for tax purposes before
taking section 179 adjustment of $25,000.
2.
The $5,000 of interest income is from an interest earning checking account.
3.
ABC had bad debt accrual expense of $4,500 for book purposes, but no actual
charge-offs during the year.
4.
By year-end they had billed $41,000 in revenue that was uncollected.
Required:
-Prepare a form 1065 for ABC Partnership, including the Schedule K-1 for the partners
and all other required schedules. Form 4562 for depreciation is not required.
-If any information is missing take reasonable assumptions and attach a listing of those
assumptions.

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