Amy and Mitchell share equally (50%) in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current year, Amy's capital account has a balance of $300,000, and the LLC has debts of $200,000 payable to unrelated parties. All debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. The following information about AM's operations for the current year is obtained from the LLC's records. Revenues $1,400,000 Other "ordinary and necessary" operating expenses (e.g. 500,000 utilities, repairs, and rent) W-2 wages to employees Depreciation expense Interest income Long-term capital gain Charitable contribution (cash) 200,000 300,000 4,000 6,000 4,000 20,000 Cash distribution to Amy Unadjusted basis of partnership property immediately after acquisition 1,600,000 Year-end LLC debt payable to unrelated parties is $140,000. Assume that all transactions are reflected in her LLC interest beginning capital and basis in the same manner. All AM Products' activities are eligible for the qualified business income deduction. a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. LLC interest at the beginning of the year: LLC interest at end of the year: 400,000 553,000 b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income Net long-term capital gain 3,000 Interest income Charitable contribution deduction 2,000 Cash distribution x Feedback Check My Work Partially correct c. Based on the information provided, what other calculations is Amy required to make? Amy may be eligible to deduct up to % of the ordinary income as qualified business income under 5 199A and will make require a cash outflow by Amy or the LLC, and it does not that calculation on her return. This deduction does not is from the LLC affect her basis or capital account. As someone treated as a general partner, Amy's distributive share of the LLC's ordinary business income subject to self-employment tax and possibly the additional Medicare tax. Her net investment income may be subject to the additional tax under 5 1411. Feedback Check My Work Partially correct d. Prepare Amy's tax-basis capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending tax basis in the LLC interestss, addresses, EIN as calculated in part (a)? Capital account balance, beginning 300,000 year d. Prepare Amy's tax-basis capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending tax basis in the LLC interestss, addresses, EIN as calculated in part (a)? Capital account balance, beginning year Ordinary income Interest income Net long-term capital gain 3,000 Less: Charitable contribution Cash distribution to Amy 300,000 Capital account balance, end of year Amy's capital account differs from her basis only by the amount of her share of LLC liabilities e. Using the information from parts (a) to (d), prepare Amy's Schedule K-1 as if you were the preparer of AM Products LLC's tax return. Provide all information that Amy needs to the extent you can. Enter all amounts as positive numbers. 651119 Final K-1 Amended K-1 OMB No. 1545-0123 Part III Partner's Share of Current Year Income, Deductions, Credits, and Other Items Schedule K-1. (Form 1065) 2020 Department of the Treasury For calendar year 2020, or tax year Internal Revenue Service 1 Ordinary business income (loss) beginning /2020 ending 15 Credits Partner's Share of Income, Deductions, Credits, etc. See separate instructions. Part I Information About the Partnership A Partnership's employer identification number B Partnership's name, address, city, state, and ZIP code AM Products, LLC 2 Net rental real estate income (loss) 3 Other net rental income (loss) 16 Foreign transactions 4a Guaranteed payments for services 4b Guaranteed payments for capital C IRS Center where partnership filed return 4c Total guaranteed payments D Check if this is a publicly traded partnership (PTP) E Part II Information About the Partner Partner's SSN or TIN (Do not use TIN of a disregarded entity. See Inst.) 5 Interest income 6a Ordinary dividends 6b Qualified dividends Name, address, city, state, and ZIP code for partner entered in E. See instructions. Amy 6c Dividend equivalents 17 Alternative minimum taxi H1 H2 If the partner is a disregarded entity (DE), enter the partner's: TIN Name 11 What type of entity is this partner? General partner or LLC member- a Limited partner or other LLC manager Domestic partner member a Foreign partner 8 Net short-term capital gain (loss) 9a Net long-term capital gain (loss) 18 Tax-exempt income and nondeductible expenses Individual 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here a 9b Collectibles (28%) gain (loss) 9c Unrecaptured section 1250 gain A C K Partner's share of profit, loss, and capital (see instructions): 10 Net section 1231 gain (loss) Beginning Ending 11 Other income (loss)) 19 Distributions Profit % % A Loss % % Capital % 12 Section 179 deduction 20 Other information: Check if decrease is due to sale or exchange of partnership interest a 13 Other deductions A A 2 STMT QBI Partner's share of liabilities: Beginning. Ending Nonrecourse $ Qualified nonrecourse $ $ financing Recourse $ W-2 wages UBIA K Partner's share of liabilities: Nonrecourse Qualified nonrecourse financing $ Beginning Ending Recourse o Check this box if Item K includes liability amounts from lower tier partnerships. 14 Self-employment earnings (loss) QB! W-2 wages UBIA Beginning capital account...... $ Partner's capital account analysis: 21 a More than one activity for at-risk purposes Capital contributed during the year.. $ 22 a More than one activity for passive activity purposes Current year net income (loss)..... $ "See attached statement for additional information. Other increase (decrease) (attach $ explanation) Withdrawals & distributions....... $ Ending capital account $ LOK - D M N Did the partner contribute property with a built-in gain or loss? Yes No If "Yes," attach statement. See instructions. Partner's Share of Net Unrecognized Section 704(c) Gain or (Loss) Beginning capital account. Ending $ For Paperwork Reduction Act Notice, see Instructions for Form 1005. ww.irs.gov www.irs.gov/Form1065 Cat. No. 113948 Schedule K-1 (Form 1065) 2020