Carrie D'Lake, Reed A. Green, and Doug A. Divot share a passion for golf and decide to go into the golf club manufacturing business together. On January 2, 2021, D'Lake, Green, and Divot form the Slicenhook Partnership, a general partnership. Slicenhook's main product will be a perimeter-weighted titanium driver with a patented graphite shaft. All three partners plan to actively participate in the business. The partners contribute the following property to form Slicenhook: Partner Carrie D'Lake Reed A. Green Doug A. Divot Contribution Land, FMV $ 460,000 Basis $460,000, Mortgage $ 60,000 Cash Cash $ 400,000 $ 400,000 Carrie had recently acquired the land with the idea that she would contribute it to the newly formed partnership. The partners agree to share in profits and losses equally. Slicenhook elects a calendar year-end and the accrual method of accounting. In addition, Slicenhook received a $1,500,000 recourse loan from Big Bank at the time the contributions were made. Slicenhook uses the proceeds from the loan and the cash contributions to build a state-of-the-art manufacturing facility ($1,200,000), purchase equipment ($600,000), and produce Inventory ($400,000). With the remaining cash, Slicenhook Invests $45,000 in the stock of a privately owned graphite research company and retains $55,000 as working cash. Slicenhook operates on a just-in-time Inventory system so it sells all Inventory and collects all sales Immediately. That means that at the end of the year, Slicenhook does not carry any Inventory or accounts receivable balances. During 2021, Slicenhook has the following operating results: Sales Cost of goods sold Interest income from tax-exempt bonds Qualified dividend income from stock Operating expenses Depreciation (tax) $179 on equipment Equipment Building Interest expense on debt $ 1,126,000 400,000 900 1,500 126,000 $ 39,000 81,000 24,000 144,000 120,000 The partnership is very successful in its first year. The success allows Slicenhook to use excess cash from operations to purchase $15,000 of tax-exempt bonds (you can see the Interest income already reflected in the operating results). The partnership also makes a principal payment on its loan from Big Bank in the amount of $300,000 and a distribution of pincipal payment on its van IIVI DI DALIK in ue amounIL UI $300,000 and a VISLIIDULIVII VI $100,000 to each of the partners on December 31, 2021. The partnership continues its success in 2022 with the following operating results: Sales Cost of goods sold Interest income from tax-exempt bonds Qualified dividend income from stock Operating expenses Depreciation (tax) Equipment Building Interest expense on debt $ 1,200,000 420,000 900 1,500 132,000 $ 147,000 30,000 177,000 96,000 The operating expenses include a $1,800 trucking fine that one of its drivers Incurred for reckless driving and speeding and meals expense of $6,000 (the meals were not provided by a restaurant). By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership Interest, Indie Ruff. Indle has agreed to purchase Reed's Interest in Slicnhook for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indle to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's Interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets: Cash Investment-tax exempts Investment stock Equipment-net of depreciation Building-net of depreciation Land Total Tax Basis $ 876,800 15,000 45,000 333,000 1,146,000 460,000 $2,875,800 FMV $ 876,800 18,000 45,000 600,000 1,440,000 510,000 $ 3,489,800 Carrie and Doug propose that Slicenhook distribute the following to Reed in complete liquidation of his partnership Interest: Cash Investment stock Tax Basis $ 485,000 FMV $ 485,000 Equipment-$200,000 cost, net of depreciation 45,000 111,000 45,000 200,000 Total $ 641,000 $ 730,000 Slicenhook has not purchased or sold any equipment since its original purchase just after formation. e. Using the Information provided, prepare Slicenhook's page 1 and Schedule K to be included with Its Form 1065 for 2021. Also, prepare a Schedule K-1 for Carrie. (Use 2021 tax rules regardless of year on tax form. Enter any losses as a negative number, otherwise input the rest of the values as positive. Enter percentages rounded to 2 decimal places. Enter any non-financial information, (e.g. Names, Addresses, social security numbers) EXACTLY as they appear in any given information or Problem Statement.) Prepare Form 1065. 1065 PG 1 Schedule K Schedule K1 Prepare Slicenhook's page 1. Form 1065 Department of the Treasury Internal Revenue Service A Principal business activity B Principal product or service C Business code number U.S. Return of Partnership Income For calendar year 2020, or tax year beginning 2020, ending 20 OMB No. 1545-0123 2020 Go to www.irs.gov/Form 1065 for instructions and the latest information. Name of Partnership Number, street, and room or suite no. If a P.O. box, se0 instructions. D Employer identification number Type or Print E Date business started City or town, state or province, country, and ZIP or foreign postal code F Total assets (see instructions) G Check applicable boxes: (1) Initial Return (2) Final Return (3) Name Change (5) Amended (4) Address Change Retum (1) Cash (2) Accrual (3) Other (specify) H Check accounting method: 1 year. Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax J Check if Schedules C and M-3 are attached K Check if partnership (1) Aggregated activities for section 465 at-risk purposes (2) Grouped activities for section 469 passive activity purposes Caution: Include only trade or business income and expenses on lines 1a through 22 below. See instructions for more 1a Gross receipts or sales In Rehime and allowances information. 1a th information. 1a Gross receipts or sales b Ratums and allowances c Balance. Subtract line 1b from line fa 1a 1b 10 0 2 Cost of goods sold (attach Form 1125-A) 3 Gross profit. Subtract line 2 from line 10 Income 2 3 (see instructions Deductions 4 Ordinary income (loss) from other partnerships, estates, and trusts (attach statement) 5 Net farm profit (loss) (attach Schedule F (Form 1040)) 6 Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) 7 Other income (loss) (attach statement) 8 Total income (loss). Combine lines 3 through 7 9 Salaries and wages (other than to partners) (less employment credits) 10 Guaranteed payments to partners 11 Repairs and maintenance 12 Bad debts 13 Rant 14 Taxes and licenses 15 Interest (see instructions) 16a Depreciation (if required, attach Form 4562) 4 5 6 7 8 9 10 11 12 13 14 15 16a for b Less depreciation reported on Form 1125-A and elsewhere on return 16b 16c limitations) 17 Depletion (Do not deduct all and gas depletion.) 17 Tax and Payment 18 Retirement plans, etc. 19 Employee benefit programs 20 Other deductions (attach statement) 21 Total deductions. Add the amounts shown in the far right column for lines 9 through 20 22 Ordinary business income (loss). Subtract ine 21 from line 8 23 Interest due under the look-back method-completed long-term contracts (attach Form 8697) 24 Interest due under the look-back method-income forecast method (attach Form 8866) 25 BBAAAR imputed underpayment (see instructions) 26 Other taxes (see instructions) 27 Total balance due. Add lines 23 through 26 28 Payment (see instructions) 29 Amount owed. If line 28 is smaller than line 27, enter amount owed 30 Overpayment. If line 28 is larger than line 27, enter overpayment 23 24 25 26 27 28 29 30 Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than partner or limited liability company member) is based on al information of which preparer has any knowledge. 18 19 20 21 0 22 Sign May the IRS discuss this return with the preparer shown below? see (Use 2021 tax rules regardless of year on tax form. Enter any losses as a negative number, otherwise input the rest of the values as positive. Enter percentages rounded to 2 decimal places. Enter any non-financial information, (e.g. Names, Addresses, social security numbers) EXACTLY as they appear in any given information or Problem Statement.) Prepare Form 1065. 1065 PG 1 Schedule K Schedule K1 Prepare Slicenhook's Schedule K. Form 1065 (2020) Schedule K Partners' Distributive Share Items 1 Ordinary business income (loss) (page 1, line 22) 2 Net rental real estate income (loss) (attach Form 8825) 3a Other gross rental income (loss) b Expenses from other rental activities (attach statement) Other net rental income (loss). Subtract line 3b from line 3a 4 Guaranteed payments: Total. Add lines 43 and 4b 5 Interest income a Services 4a b Capital 4b Income (Loss) 6 Dividends and dividend equivalents: 7 Royalties a Ordinary dividends b Qualified dividends c Dividend equivalents 8 Net short-term capital gain (loss) (attach Schedule D (Form 1065)) 9a Net long-term capital gain (loss) (attach Schedule D (Form 1065)) b Collectibles (28%) gain (loss) 6b Total amount 2 4c 5 B 9a 9b Unrecaptured section 1250 gain (attach statement) 10 Net section 1231 gain (loss) (attach Form 4797) 9c 10 11 Other income (loss) (see instructions) Type 11 12 Section 179 deduction (attach Form 4562) 12 Page 4 Deductions 12 Section 179 deduction (attach Form 4562) 13a Contributions b Investment interest expense Section 59(e)(2) expenditures: (1) Type d Other deductions (see instructions) Type 14a Not eamings (loss) from self-employment 12 13a 13b (2) Amount 13c(2) 13d 14a Self- Employment b Gross farming or fishing income 14b Gross nonfarm income 14c 15a Low-income housing credit (section 42()(5)) 15a b Low-income housing credit (other) 15b Credits c Qualified rehabilitation expenditures (rental real estate) (attach Form 3468,applicable) d Other rental real estate credits (sR instructions) 15c Type 15d Other rental credits (see instructions) Other credits (see instructions) 16a Name of country or U.S. possession Type 150 Type 15f Foreign Transactions Alternative Minimum Tax (AMT) Items b Gross income from all sources Gross income sourced at partner level 16b 16c Foreign gross income sourced at partnership level d Reserved for future use Passive category Foreign branch category 9 h Other (attach statement). 16f General category Deductions allocated and apportioned at partner level Interest expense Other Deductions allocated and apportioned at partnership level to foreign source income k Reserved for future use Foreign branch 16h category m Passive category In General category o Other (attach statement) P Total foreign taxes (check one): Paid Accrued 16 16m d Reduction in taxes available for credit (attach statement) Other foreign tax information (attach statement) 17a Post-1986 depreciation adjustment b Adjusted gain or loss Depletion (other than oil and gas) Oil, gas, and geothermal properties-gross income Oil, gas, and geothermal properties-deductions Other AMT items (attach statement) 18a Tax-exempt interest income b Other tax-exempt income P Nondeductible expenses 19a Distributions of cash and marketable securities Other Information b Distributions of other property 20a Investment income b Investment expenses Other items and amounts (attach statement) 17a 17b 17c 17d 170 171 18a 18b 18c 19a 19b 20a 20b THIS FORM 18 A SIMULATION OF AN OFFICIAL U.8. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILING & OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education. Form 1086 (2020) 1065 PG 1 Schedule K Schedule K1 Prepare a Schedule K-1 for Carrie. Schedule K-1 (Form 1065) 2020 Department of the Treasury For calendar year 2020, or tax year Internal Revenue Service year beginning ending 20 2020 Final K-1 Part III Amended K-1 OMB No. 1545-0123 Partner's Share of Current Year Income, Deductions, Credits, and Other Items 15 Credits 1 Ordinary business income (loss) 2 Not rental real estate income (loss) Partner's Share of Income, Deductions, Credits, etc. See back of form and separate instructions. 3 Other net rental income (loss) 16 Foreign transactions Part I Information About the Partnership A Partnership's employer identification number 48 Guaranteed payments for services 4b Guaranteed payments for capital B Partnership's name, address, city, state, and ZIP code 40 Total guaranteed payments C IRS Center where partnership filed retum 6 Interest income Ba Ordinary dividends D Check if this is a publicly traded partnership (PTP) Bb Qualified dividends Part II Information About the Partner 80 Dividend equivalents 17 7 Royalties Partner's SSN or TIN (Do not use TIN of a disregarded entity. See instructions.) Alternative minimum tax (AMT)items Not short-term capital gain (loss) F Name, address, city, state, and ZIP code for partner entered in E. See instructions. Ba Not long-term capital gain (loss) 18 Tax-exempt income and nondeductible expenses General partner or Limited partner or other LLC Bb Collectibles (28%) gain (loss) LLC A member-manager member H1 Domestic partner Foreign partner Unrecaptured section 1250 80 gain General partner or LLC Limited partner or other LLC ab Collectibles (28%) gain (loss) A member Foreign partner member-manager H1 Domestic partner H2 If the partner is a disregarded entity (DE), enter the partner's: TIN Name 80 Unrecaptured section 1250 gain 10 Net section 1231 gain (loss) 11 What type of entity is this partner? 11 Other income (loss) 18 Distributions 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here J Partner's share of profit, loss, and capital (see instructions): Profit Loss Capital Beginning % A Ending 12 Section 179 deduction 20 Other information 96 13 Other deductions 96 Check if decrease is due to sale or exchange of partnership interest K Partner's share of liabilities: Nonrecourse Qualified nonrecourse financing Beginning Ending Recourse Check this box if item K includes liability amounts from lower tier partnerships. L Partner's Capital Account Analysis Beginning capital account Capital contributed during the year Current year net income (loss) Other increase (decrease) (attach explanation) Withdrawals & distributions Ending capital account M Did the partner contribute property with a built-in gain or loss? Yes ONO If "Yes," attach statement (see instructions) N Partner's Share of Net Unrecognized Section 704(c) Gain or (Loss) Beginning Ending S S Self-employment earnings 14 (loss) A 21 More than one activity for at-risk purposes" (100,000) 22 More than one activity for passive activity purposes" "See attached statement for additional information. For IRS Use Only Cat. No. 11394R Schedule K-1 (Form 1065) 2020 For Paperwork Reduction Act Notice, see Instructions for Form 1065. www.irs.gov/Form1065 THIS FORM 18 A SIMULATION OF AN OFFICIAL U.8. TAX FORM. IT 18 NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILING & OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education. < Schedule K Schedule K1 >