Adam Ant 421 Brickell Avenue # 1420 Miami, FL 33131 (SS #987-65-4321), Bob Builder 1111 Biscayne Boulevard Miami, FL 33131 (SS #876-54-3210) and Clark Carter 121 Ocean Drive Miami Beach, FL 33149 (SS #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 this 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 §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 make reasonable assumptions and attach a listing of those assumptions
Be sure to attach a group cover page if working in a group.