Additional information and assumptions

1.Members' draws are equally distributed.

2.Use individual income tax rates for 2011.

3.Dividends are considered qualified dividends.

4.When computing tax liability for members and shareholders, disregard any other source of income, deductions or credits.

5.Assume Brian files married filing jointly, has no dependents, and he does not itemize deductions.

6.Use corporate income tax rates currently in effect.

7.Brian's guarantee payments are included in Salaries and Wages

8.Tax depreciation is $10,959 in 20X2, $36,416 in 20X3, and $48,174 in 20X4.

9.Brian spends at least 500 hours managing the LLC regularly and continuously, and he materially participates in this activity.In other words, managing partners are considered "general partners" when the LLC is treated as a partnership.

PROBLEM TO BE SOLVE:

1. COMPUTE SCHEDULE K-1 INCOME OR LOSS FOR EACH YEAR
2. WHAT IS THE ORDINARY INCOME OR LOSS FOR THE THREE YEAR PERIOD
3. WHEN PREPARING ANALYSIS CONSIDER ANY BOOK TO TAX DIFFERENCES
4. WHAT IS THE TAX EFFECT OF PASS THROUGH LOSS AND INCOME TO BRIAN?

Table 3 - Projected Financial Statements BALANCE SHEET PACIFIC RESTAURANTS, LLC 20X2 20X3 20X4 CURRENT ASSETS Cash $ 13,449 $ 15,804 $ 28,384 Accounts receivable 6,459 9,689 15,502 Food & Beverage inventory 18,923 23,984 43,886 TOTAL CURRENT ASSETS 38,831 49,476 87,771 FIXED ASSETS Equipment 50,000 57,500 66,125 Vehicles 84,473 97,144 Building 68,918 79,256 131,144 TOTAL FIXED ASETS 118,918 221,229 294,413 TOTAL ASSETS $ 157,749 $ 270,705 $ 382,184 CURRENT LIABILITIES Accounts payable 38,269 57,404 33,554 TOTAL CURRENT LIABILITIES 38,269 57,404 33,554 OWNERS' CAPITAL Capital 200,000 200,000 200,000 Draws (7,162) (222,945) Net Profit/(Loss) 80,520) 20,464 371,575 TOTAL OWNERS' CAPITAL 119,480 213,301 348,630 TOTAL LIABILITIES & OWNERS' CAPITAL $ 157,749 $ 270,705 $ 382,184Partnership C Corporation 2018 2018 - PARTNER 1 PARTNER 2 SHAREHOLDER PARTNER 1 BASIS PARTNER 2 BASIS 2018 2018 BTOZ EFFECTIVE TAX RATE TOTAL FOR BOTH PARTNERSTable 3 - Projected Financial Statements PROFIT & LOSS STATEMENT PACIFIC RESTAURANTS, LLC 20X2 2033 20x4 REVENUES Sales Food :5 558,075 $ 837,113 $ 1,339,380 Sales Beverages 211,558 317,337 507,739 TOTAL REVENUES 769,633 1,154,450 1,847,119 F&B COSTS Purchases - Food 204,061 265,279 344,863 Purchases - Beverages 127,824 166,171 216,023 TOTAL F&B COSTS 331,885 431,451 560,886 GROSS PROFIT $ 437,748 $ 722,999 $ 1,286,234 OPERATING EXPENSES Salaries & wages 302,236 392,906 510,778 Employee benets 39,942 51,925 67,502 Advertising 67,888 88,254 1 14,73 1 Depreciation 1 1,892 44,246 58,883 Administrative & general expenses 82,030 106,639 138,631 Meals & entertainment 9,554 12,420 16,146 Political contributions 1,550 2,015 2,620 Repairs & maintenance 3,177 4,130 5,369 TOTAL OPERATING EXPENSES 518,269 702,536 914,659 NET PROFIT OR (LOSS) $ (80,521) $ 20,463 $ 371,574 Table 1 - Capital Contributions (Cash unless indicated) 1. Brian Mcintyre - Managing Member $50,000 2. Sophia Mcintyre $50,000 3. Margaret Vitale Restaurant equipment: adjusted basis of $35,000 and a FMV of $50,000 4. Donald Hong $50,000 Table 2 - Brian's Guarantee Payments 2012 2013 2014 $70,000 $80,000 $90,000