Prepare a current year partnership tax return

Assignment Help Taxation

Reference no: EM131288772

Exercise #1

The Dapper-Dons Partnership was formed ten years ago as a general partnership to custom tailor men's clothing. Dapper-Dons is located at 123 Flamingo Drive in City, ST, 54321. Bob Dapper manages the business and has a 40% capital and profits interest. His address is 709 Brumby Way, City, ST, 54321. Jeremy Dons owns the remaining 60% interest but is not active in the business. His address is 807 Ninth Avenue, City, ST, 54321. The partnership values its inventory using the cost method and did not change the method used during the current year. The partnership uses the accrual method of accounting. Because of its simplicity, the partnership is not subject to the partnership audit procedures. The partnership has no foreign partners, no foreign transactions, no interests in foreign trusts, and no foreign financial accounts. This partnership is neither a tax shelter nor a publicly traded partnership. No changes in ownership of partnership interests occurred during the current year. The partnership made cash distributions of $155,050 and $232,576 to Dapper and Dons, respectively, on December 30 of the current year. It made no other property distributions. Financial statements for the current year are presented in Tables C:9-1 and C:9-2. Assume that Dapper-Dons' business qualifies as a U.S. production activity and that its qualified production activities income is $600,000. Dapper-Dons, being an eligible small pass-through partnership, uses the small business simplified overall method for reporting these activities (see discussion for Line 13d of Schedules K and K-1 in the Form 1065 instructions).

Prepare a current year (2014 for this problem) partnership tax return for Dapper-Dons Partnership. You will need to complete the return using Forms 1065, Schedule K-1 for Form 1065 and 1125A for 2014 that you can access from the IRS web site (IRS.Gov). The forms are in a PDF format and should be completed by filling in the appropriate line items.

Tables on pages 2-4 of this document.

TABLE C:9-1 Dapper-Dons Partnership Income Statement for the 12 Months Ending December 31 of the Current Year (Problem C:9-57)

Sales		52,357,000
Returns and allowances		520.000)
Returns and allowances
		52,337,000
Beginning inventory (FIFO method)	5 200,050
Purchases	624,000
Labor	600,000
Supplies	42,000
Other costs'	12.000
Other costs'
Goods available for sale	51,478,050
Ending inventory')	(146.000)	(1.332.050)
Ending inventory')
Gross profit		51,004,950
Salaries for employees other than partners (W-2 wages)	551,000
Guaranteed payment for Dapper	85,000
Utilities expense	46,428
Depreciation (MACRS depreciation is 574,311)C	49,782
Automobile expense	12,085
Office supplies expense	4,420
Advertising expense	85,000
Bad debt expense	2,100
Interest expense (all trade- or business-related)	45,000
Rent expense	7,400
Travel expense (meals cost $4,050 of this amount)	11,020

Repairs and maintenance expense	68.300
Accounting and legal expense	3.603
Charitable contributionsi	16.403
Payroll taxes	5.183
Other taxes i all trade- or business-related i	1.403
Other taxes i all trade- or business-related i
Total expenses		494.115
Total expenses
Operating profit		S 510,835
Other income and losses:
Gain on sale of AB stocke	S 18.000
Loss on sale of CD stock'	(26.075)
Sec. 1231 gain on sale of landg	5.050
Interest on U.S. Treasury bills for entire year (S80.000 face amount)	2.000
Dividends from 15%-owned domestic corporation	11.000	9.975
Dividends from 15%-owned domestic corporation
Net income		S 520.810

TABLE C:9-2 Dapper-Dons Partnership Balance Sheet for January 1 and December 31 of the Current Year (Problem C:9-57)

Exercise #2

The AB Partnership pays its only liability (a $100,000 mortgage) on April 1 of the current year and terminates that same day. Alison and Bob were equal partners in the partnership but have partnership bases immediately preceding these transactions of $110,000 and $180,000, respectively, including his or her share of liabilities. The two partners receive identical distributions with each receiving the following assets:

Assets	Partnership's Basis	FMV
Cash	$ 20.000	$ 20,000
Inventory	33,000	35,000
Receivables	10.000	8,000
Building	40.000	60.000
Land	15.000	!QIN
Land		!QIN
Total	$118.000	$133.000
Total

The building has no depreciation recapture potential. What are the tax implications to Alison, Bob, and the AB Partnership of the April 1 transactions (i.e., basis of assets to Alison and Bob, amount and character of gain or loss recognized, etc.)? Assume that no Sec. 754 election is in effect.

Exercise #3

ABC Company a limited liability company (LLC) organized in the state of Florida, reports using a calendar tax year-end. The LLC chooses to be taxed as a partnership. Alex, Bob, and Carrie (all calendar year tax payers) own ABC equally, and each has a basis of $40,000 in his or her ABC interest on he first day following results for the current year's operation:

Operating income	630.000
Short-term capital gain	12.000
Long-term capital loss	6.000

Each owner received a $12,000 cash distribution during the current year.

a. What are the amount and character of the income, gain, and loss Alex must report on his tax return as a result of ABC's operations?

b. What is Alex's basis in his ownership interest in ABC after the current year's operations?

Part -2:

Exercise #1

Mike and Nancy are equal shareholders in MN Corporation, an S corporation. The corporation, Mike, and Nancy are calendar year taxpayers. The corporation has been an S corporation during its entire existence and thus has no accumulated E&P. The shareholders have no loans to the corporation. The corporation incurred the following items in the current year:

Sales	5300,000
Cost of goods sold	140.000
Dividends on corporate investments	10,000
Tax-exempt interest income	3,000
Sec. 124S gain (recapture) on equipment sale	22.000
Sec. 1231 gain on equipment sale	12.000
Long-term capital gain on stock sale	8,000
Long-term capital loss on stock sale	7,000
Short-term capital loss on stock sale	6.000
Depreciation	18,000
Salary to Nancy	20,000
Meals and entertainment expenses	7,800
Interest expense on loans allocable to:
Business debt	32,000
Stock investments	6.400
Tax-exempt bonds	1,800
Principal payment on business loan	9,000
Charitable contributions	2,000
Distributions to shareholders (S1S.000 each)	30,000

a. Compute the S corporation's ordinary income and separately stated items.

b. Show Mike's and Nancy's shares of the items in Part a.

c. Compute Mike's and Nancy's ending stock bases assuming their beginning balances are $100,000 each. When making basis adjustments, apply the adjustments in the order outlined on pages C:11-24 and C:11-25 of the text.

Exercise #2

Redfern Corporation, a calendar year taxpayer, has been an S corporation for several years. Rod and Kurt each own 50% of Redfern's stock. On July 1 of the current year (assume a non-leap year), Redfern issues additional common stock to Blackfoot Corporation for cash. Rod, Kurt, and Blackfoot each end up owning one-third of Redfern's stock. Redfern reports ordinary income of $125,000 and a short-term capital loss of $15,000 in the current year. Eighty percent of the ordinary income and all the capital loss accrue after Blackfoot purchases its stock. Redfern makes no distributions to its shareholders in the current year. What income and losses do Redfern, Blackfoot, Rod, and Kurt report as a result of the current year's activities?

Exercise #3

Bottle-Up, Inc., was organized on January 8, 2005, and made its S election on January 24, 2005. The necessary consents to the election were filed in a timely manner. Its address is 1234 Hill Street, City, ST 33333. Bottle-Up uses the calendar year as its tax year, the accrual method of accounting, and the first-in, first-out (FIFO) inventory method. Bottle-Up manufactures ornamental glass bottles. It made no changes to its inventory costing methods this year. It uses the specific identification method for bad debts for book and tax purposes. Herman Hiebert and Melvin Jones own 500 shares each. Both individuals materially participate in Bottle-Up's single activity. Herman Hiebert is the tax matters person. Financial statements for Bottle-Up for the current year are shown in Tables C - 2 through C - 4. Assume that Bottle-Up's business qualifies as a U.S. production activity and that its qualified production activities income is $90,000. The S corporation uses the small business simplified overall method for reporting these activities (see discussion for Line 12d of Schedules K and K-1 in the Form 1120S instructions). Prepare a 2014 S corporation tax return for Bottle-Up, showing yourself as the paid preparer.

You will need to complete the return using Forms 1120 S, Schedule K-1 for Form 1120 S and 1125A for 2014 that you can access from the IRS web site (IRS.Gov). The forms are in a PDF format and should be completed by filling in the appropriate line items.

Attachment:- Bottle-Up Inc.pdf

Reference no: EM131288772

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