Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. 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. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records. Ordinary income $900,000 W-2 wages to employees 200,000 Depreciation expense 300,000 Interest income 4,000 Long-term capital loss Long-term capital gain Charitable contribution (cash) 6,000 12,000 4,000 20,000 Cash distribution to Amy Unadjusted basis of partnership depreciable property 1,600,000 Year-end LLC debt payable to unrelated parties is $140,000. Assume all transactions are reflected in her beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction and that the unadjusted basis of assets immediately after acquisition was $800,000. 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: $ 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 Interest income Charitable contribution deduction Cash distribution 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 $ 199A, and will make that calculation on her return. This deduction require a cash outflow by Amy or the LLC, and it 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 from the LLC may be subject to the additional tax under $ 1411. d. Prepare Amy's capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending basis as calculated in part (a)? Capital account balance, beginning year Ordinary income Interest income Net long-term capital gain Less: Charitable contribution Cash distribution to Amy Capital account balance, end of year Amy's capital account differs from her basis only by the amount of her share of LLC Schedule K-1 (Form 1065) 2018 651116 Final K-1 Amended K-1 OMB No. 1545-0123 Part III Partner's Share of Current Year Income, Deductions, Credits, and Other Items 1 Ordinary business income 15 Credits (loss) For calendar year 2018, or tax year Department of the Treasury Internal Revenue Service beginning / / 2018 ending I 2 Partner's Share of Income, Deductions, Credits, etc. See back of form and separate instructions. Net rental real estate income (loss) Part I Information About the Partnership 3 Other net rental income (loss) 16 Foreign transactions A Partnership's employer identification number 4 Guaranteed payments B Partnership's name, address, city, state, and ZIP code AM Products, LLC 5 Interest income C IRS Center where partnership filed return e-file 6a Ordinary dividends D Check if this is a publicly traded partnership (PTP) 6b Qualified dividends Part II Information About the Partner 6c Dividend equivalents E Partner's identifying number PAFLI LIITUFIlldLIUI ADUUL lile Parliler bc Dividend equivalents E Partner's identifying number 7 Royalties F Partner's name, address, city, state, and ZIP code Amy Alternative minimum tax (AMT) items G - General partner or LLC member- Limited partner or other LLC member Net short-term capital gain (loss) 9a Net long-term capital gain (loss) manager H Domestic partner Foreign partner 11 What type of entity is this partner? 9b Collectibles (28%) gain (loss) 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here o 9c Unrecaptured section 1250 gain 18 Tax-exempt income and nondeductible expenses J 10 10 Net section 1231 gain (loss) Partner's share of profit, loss, and capital (see instructions): Beginning Ending Profit % 11 Other income (loss) Loss Capital 12 Section 179 deduction 19 Distributions 13 Other deductions K Partner's share of liabilities: 20 Other information Beginning Ending Nonrecourse A CNB N Qualified nonrecourse financing Recourse Self-employment earnings (loss) Partner's capital account analysis: *See attached statement for additional information. Beginning capital account ......... $ Capital contributed during the year Current year increase (decrease)... $ Withdrawals & distributions ........ For IRS Use Only Ending capital account ......... Tay basis D GAAP Section 704/h) hook Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. 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. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records. Ordinary income $900,000 W-2 wages to employees 200,000 Depreciation expense 300,000 Interest income 4,000 Long-term capital loss Long-term capital gain Charitable contribution (cash) 6,000 12,000 4,000 20,000 Cash distribution to Amy Unadjusted basis of partnership depreciable property 1,600,000 Year-end LLC debt payable to unrelated parties is $140,000. Assume all transactions are reflected in her beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction and that the unadjusted basis of assets immediately after acquisition was $800,000. 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: $ 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 Interest income Charitable contribution deduction Cash distribution 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 $ 199A, and will make that calculation on her return. This deduction require a cash outflow by Amy or the LLC, and it 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 from the LLC may be subject to the additional tax under $ 1411. d. Prepare Amy's capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending basis as calculated in part (a)? Capital account balance, beginning year Ordinary income Interest income Net long-term capital gain Less: Charitable contribution Cash distribution to Amy Capital account balance, end of year Amy's capital account differs from her basis only by the amount of her share of LLC Schedule K-1 (Form 1065) 2018 651116 Final K-1 Amended K-1 OMB No. 1545-0123 Part III Partner's Share of Current Year Income, Deductions, Credits, and Other Items 1 Ordinary business income 15 Credits (loss) For calendar year 2018, or tax year Department of the Treasury Internal Revenue Service beginning / / 2018 ending I 2 Partner's Share of Income, Deductions, Credits, etc. See back of form and separate instructions. Net rental real estate income (loss) Part I Information About the Partnership 3 Other net rental income (loss) 16 Foreign transactions A Partnership's employer identification number 4 Guaranteed payments B Partnership's name, address, city, state, and ZIP code AM Products, LLC 5 Interest income C IRS Center where partnership filed return e-file 6a Ordinary dividends D Check if this is a publicly traded partnership (PTP) 6b Qualified dividends Part II Information About the Partner 6c Dividend equivalents E Partner's identifying number PAFLI LIITUFIlldLIUI ADUUL lile Parliler bc Dividend equivalents E Partner's identifying number 7 Royalties F Partner's name, address, city, state, and ZIP code Amy Alternative minimum tax (AMT) items G - General partner or LLC member- Limited partner or other LLC member Net short-term capital gain (loss) 9a Net long-term capital gain (loss) manager H Domestic partner Foreign partner 11 What type of entity is this partner? 9b Collectibles (28%) gain (loss) 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here o 9c Unrecaptured section 1250 gain 18 Tax-exempt income and nondeductible expenses J 10 10 Net section 1231 gain (loss) Partner's share of profit, loss, and capital (see instructions): Beginning Ending Profit % 11 Other income (loss) Loss Capital 12 Section 179 deduction 19 Distributions 13 Other deductions K Partner's share of liabilities: 20 Other information Beginning Ending Nonrecourse A CNB N Qualified nonrecourse financing Recourse Self-employment earnings (loss) Partner's capital account analysis: *See attached statement for additional information. Beginning capital account ......... $ Capital contributed during the year Current year increase (decrease)... $ Withdrawals & distributions ........ For IRS Use Only Ending capital account ......... Tay basis D GAAP Section 704/h) hook