2017 1065!!

Chad Feldheimer and Walter Sobchak are friends who decide to start a clothing business together. Their dream is to make casual clothing that is inspired and influenced by their own personal hobbies, working out at the gym and bowling. Chad and Walter develop the clothing idea and form the Fresh Threads Partnership and Fresh Threads clothing line. After several years of success they dont have time to handle their own taxes any more and have come to you for help with completing their Form 1065 partnership tax return. The Fresh Threads Partnership (employer identification no. 89-3456798) was formed ten years ago as a general partnership to design and market comfortable yet stylish casual clothing. Fresh Threads is located at 123 Flamingo Drive in Miami, Florida 33131. Chad Feldheimer (SS# 654-32-1098) manages the business and has a 40% capital and profits interest. His address is 709 Brumby Way, Miami, Florida 33131. Walter Sobchak (SS# 354-12-6531) owns the remaining 60% interest. His address is 807 9th avenue, North Miami, Florida 33134. The partnership values its inventory using the cost method and did not change the method used during the current year. The partnership uses the cash method of accounting. 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 Chad and Walter, respectively, on December 30, 2017. It made no other property distributions. Financial information for the 2017 tax year can be found on the next page. Assume that the Fresh Threads business qualifies as a U.S. production activity and that its qualified production activities income is $600,000. Using this information about the Fresh Threads Partnership for the tax year 2017, please prepare a partnership informational tax return (Form 1065) to report to the IRS the tax payable by the partners. Copies of your completed Partnership Return Form 1065 You need only submit Page 1, Schedule K, and Schedule L of Form 1065. Fresh Threads Partnership - 2017 Financial Information

Gross sales $2,357,000

Returns and allowances 20,000

Cost of goods sold 1,332,050

Salaries and wages (other than to partners) 51,000

Guaranteed payments to partners 85,000

Repairs and maintenance 68,300

Bad debts 2,100

Rent 7,400

Taxes and licenses 6,580

Interest 45,000

Depreciation allowed 74,311

Utilities expense 46,428

Automobile expense 12,085

Office supplies expense 4,420

Advertising expense 85,000

Travel expense 6,970 Meals expense (net of 50% nondeductible) 2,025

Accounting and legal expense 3,600

Current assets Cash - Beginning of tax year $10,000

End of tax year $40,000

Trade notes and accounts receivable - Beginning of tax year $72,600

End of tax year $150,100 Inventories - Beginning of tax year $200,050

End of tax year $146,000

Cost of goods sold includes Inventory at beginning of year $200,050

Purchases $624,000

Cost of labor $600,000

Additional section 263A costs $7,000

Inventory at end of year $146,000

Tax exempt securities - Beginning of tax year $220,000

End of tax year $260,000

Depreciable buildings/assets - Beginning of tax year $374,600

End of tax year $465,000

Accumulated depreciation - Beginning of tax year $160,484

End of tax year $173,100

Land (net of amortization) - Beginning of tax year $185,000

End of tax year $240,000

Accounts payable - Beginning of tax year $35,000

End of tax year $46,000

Mortgages - Beginning of tax year $44,000

End of tax year $52,000

Other current liabilities - Beginning of tax year $22,616

End of tax year $31,666

Other current liabilities include: Accrued salaries payable - Beginning $14,000,

End $18,000 Payroll taxes payable - Beginning $3,416,

End $7,106 Sales taxes payable -

Beginning $5,200,

End $6,560 Loans from partners -

Beginning of tax year $210,000

End of tax year $275,000

Partners capital accounts - Beginning of tax year $590,150

End of tax year $723,334

Sale of short-term capital assets - Basis $100,000, Sales price $73,925

Sale of long-term capital assets - Basis $40,000, Sales price $58,000

2017 1065!!