Question
Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000 and Keon
Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $7,000 principal payment on the mortgage.
For the first year of operations, the partnership records disclosed the following information:
Sales revenue $ 470,000
Cost of goods sold 410,000
Operating expenses 70,000
Long-term capital gains 2,400
1231 gains 900
Charitable contributions 300
Municipal bond interest 300
Salary paid as a guaranteed payment to Deanne (not included in expenses) 3,000
Using the information generated in answering parts (a) and (b), prepare Blue Bells page 1 and Schedule K and K-1 to be included with its Form 1065 for its first year of operations. \
Enter the required values in the appropriate fields of Form 1065 and Schedule K and K-1
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