1. The following information for 2018 relates to Marlin Corporation, a calendar year, accrual method taxpayer. Determine if activity below would result in no book to tax difference (no effect) or if there is a book to tax difference. If there is a book to tax difference, indicate the amount of the difference. If there is a book to tax difference, indicate whether the difference is Favorable (F) or Unfavorable (U) and whether it is Temporary (T) or Permanent (P).

Per books No Favorable Permanent

Effect Unfavorable Temporary

Or Amount

of difference

Interest income

from tax-exempt bonds $10,000

MACRS tax depreciation $11,000 14,000

Salary expense paid to corporate

officers (all deemed reasonable

under Sec. 162) 315,000

Capital gains in excess

of capital losses 6,000

Federal income tax liability 30,050

Life insurance premium paid for

key person life insurance 8,500

Cash dividends paid to shareholders 55,000

Total interest payments received

during the year = $40,000. $15,000 of

interest is prepaid and will be

earned the next year 25,000

Total entertainment expense

for the year 8,000

Goodwill on books not impaired

for the year, Sec 197 amortization

for the year $25,000 -0-

2. An examination of the MORE Partnerships tax books provides the following information for the current year (2019):

Net gain from operations before guaranteed payments $ 120,000

Guaranteed payment to Megan 20,000

Cash distribution to each partner $16,000, total distribution 64,000

Interest income on Acme Corporation bonds 4,000

Payment of a State fine for overweight trucks 8,000

Charitable contributions made by partnership 12,000

Decrease in total partnership liabilities from 1/1-12/31 28,000

Long term capital gain 24,000

During the year, Megan also contributed property to the partnership. Her basis in the property was $32,000 and the FMV of the property was $38,000.

Megan is a 25% partner in the partnership capital, profits and losses, and partnership liabilities. She is a general partner.

1. If Megans basis in the partnership at 1/1/19 is $95,000, what is her basis at 12/31/19?

2. List the items of income and expense that would be reported on Megans Form 1040. Assume her total itemized deductions exceed her standard deduction.