2019 U.S Tax Law

Comprehensive Problem 10-1

Emily Jackson (Social Security number 765-12-4326) and James Stewart (Social Security number 466-74-9932) are partners in a partnership that owns and operates a barber shop. The partnership's first year of operation is 2019. Emily and James divide income and expenses equally. The partnership name is J&S Barbers, it is located at 1023 Broadway, New York, NY 10004, and its Federal ID number is 95-6767676. The 2019 financial statements for the partnership are presented below.

J&S Barbers Income Statement for the Year Ending December 31, 2019
Gross income from operations			$372,300
Deductions:
Salaries to employees			94,600
Payroll taxes			14,500
Supplies			9,000
Rent			41,000
Depreciation			5,100
Short-term capital loss			2,000
Charitable contributions			500
Net income			$205,600
Partners' withdrawals (each partner)			$80,000
J&S Barbers Balance Sheet as of December 31, 2019
Assets:
Cash			$100,450
Accounts receivable			10,000
Equipment	$32,000
Accum. depreciation	(5,100)		26,900
			$137,350
Liabilities and Capital:
Accounts payable			$29,750
Notes payable			22,000
Partners' capital ($20,000 contributed by each partner)			85,600
			$137,350

Emily lives at 456 E. 70th Street, New York, NY 10006, and James lives at 436 E. 63rd Street, New York, NY 10012.

Required: Complete the Form 1065 and the accompanying K-1 forms. Do not complete Schedule D for the capital loss, Form 4562 for depreciation, or Schedule B-1 related to ownership of the partnership.

• Make realistic assumptions about any missing data.
• If an amount box does not require an entry or the answer is zero, enter "0".
• If required, round your answers to nearest dollar.
• Enter amounts as positive numbers, except for a "loss". If required, enter a "loss" as a negative number on the tax form.
• Assume all debt is recourse debt.