Assignment: Tax Return Problem
The [Your Name] Gourmet Restaurant and Cafe (Tax ID 12-3456789) is a very fancy restaurant and coffee shop located on the UTD campus. Its mailing address is 800 West Campbell Road Richardson, TX 75080. It was formed on January 1, 2005. It is a cash method Limited Liability Company (LLC) that is treated as a partnership for federal income tax purposes.
The managing partner is Jack T. Ripper (social security number 555-55-5555). Jack has a 60% capital and profits interest. His address is 3060 Mockingbird Lane Dallas, Texas 75205.
Val R Putin owns the remaining 40% partnership interest but is a mere investor and is not active in the business. Val's Social Security Number is 666-77-8899 and his address is 4050 Alpha Road Farmers Branch, TX 75244.
The partnership made cash distributions of $273,429 and $182,286 to Ripper and Putin, respectively, at the end of 2015.
The partnership's income statement for the year ended December 31, 2015 is as follows:
|
Sales
|
4,060,000
|
|
Cost of Sales
|
1,905,714
|
|
Gross Profit
|
2,154,286
|
|
Operating Expenses
|
|
|
Salaries and Wages
|
787,143
|
|
Guaranteed Payment to Jack Ripper
|
290,000
|
|
Repairs and Maintanence
|
41,429
|
|
Rent Expense
|
99,429
|
|
Accounting fees
|
12,429
|
|
Depreciation
|
697,143
|
|
Advertising
|
82,857
|
|
Cash Charitable Contributions
|
33,143
|
|
|
2,043,572
|
|
Net Operating Income
|
110,714
|
|
Other Income and Losses:
|
|
|
Gain on sale of Texas Instruments stock held for 13 months
|
49,714
|
|
Loss on sale of IBM stock held for 6 months
|
(29,000)
|
|
Section 1231 gain on sale of land
|
35,214
|
|
Interest on bank account
|
12,429
|
|
Divdends on Texas Instruments Stock
|
6,214
|
|
Interest on City of Plano Tax Exempt Bonds
|
4,143
|
Additional Facts:
The partnership began business on August 1, 2005, and its business code number is 722511. It files its tax return with the IRS Ogden Utah Service Center.
The partnership had recourse liabilities at the end of the year of $103,571, and total assets of $1,168,286. The recourse liabilities were recourse only to the LLC and not to the partners personally and were not secured by any property.
The $290,000 guaranteed payment to Jack Ripper was for performing the services of managing the restaurant and was determined without regard to partnership profits.
Ripper's capital account at the beginning of 2015 was $ 559,286. The K-1s reflect tax basis capital accounts.
Prior to this tax year, the restaurant leased all of its equipment or its equipment was fully tax depreciated. On 1/2/2015 the LLC purchased $828,571 of depreciable section 1245 property which it used in the business. It elected to expense the maximum section 179 and bonus depreciation (assume it qualifies for both). The property is 5-year MACRS property, 200% DDB.
The gain on the sale of land resulted from the sale of land that the restaurant had purchased as a site to open a second restaurant, but decided not to go through with the second restaurant. The partnership held the land for more than 2 years.
The partnership made the charitable contributions to Scottish Rite hospital.
Instructions
Prepare:
1. Page 1 of Form 1065
2. Schedule K of Form 1065
3. Schedule K-1 for Jack Ripper (only)
In order to simplify the problem, DO NOT prepare any other schedules of the tax return, including the K-1 for Val Putin.
NOTE: any file you submit must contain your last name and first name so I can keep track of the submissions. You may either upload, email, or submit in class.