Comprehensive Problem 10-1

Emily Jackson (Social Security number 765-12-4326) and James Stewart (Social Security number 466-74-9932) are partners in a partnership that owns and operates a barber shop. The partnership's first year of operation is 2016. Emily and James divide income and expenses equally. The partnership name is J&S Barbers, it is located at 1023 Broadway, New York, NY 10004, and its Federal ID number is 95-6767676. The 2016 financial statements for the partnership are presented below.

J&S Barbers Income Statement

for the Year Ending December 31, 2016 Gross income from operations $371,600 Deductions: Salaries to employees 94,000 Payroll taxes 10,000 Supplies 9,000 Rent 45,000 Depreciation 5,100 Short-term capital loss 2,000 Charitable contributions 500 Net income $206,000 Partners' withdrawals (each partner) $80,000 J&S Barbers Balance Sheet

as of December 31, 2016 Assets: Cash $100,850 Accounts receivable 10,000 Equipment $32,000

Accum. depreciation (5,100) 26,900 $137,750 Liabilities and Capital: Accounts payable $29,750 Notes payable 22,000 Partners' capital ($20,000 contributed by each partner) 86,000 $137,750 Emily lives at 456 E. 70th Street, New York, NY 10006, and James lives at 436 E. 63rd Street, New York, NY 10012.

Required:

Complete J&S Barbers' Form 1065 and Emily and James' Schedule K-1. Do not fill in Schedule D for the capital loss, Form 4562 for depreciation, or Schedule B-1 related to ownership of the partnership. Make realistic assumptions about any missing data. If an amount box does not require an entry or the answer is zero, enter "0". If required, round your answers to nearest dollar.

If required, enter a "loss" as a negative number on the tax form. Do not enter deductions as negative numbers.

Form 1065

Department of the Treasury Internal Revenue Service U.S. Return of Partnership Income

For calendar year 2016, or tax year beginning _ _ _ _ , 2016, ending _ _ _ , 20_ _ _ .

?Information about Form 1065 and its separate instructions is at www.irs.gov/form1065. OMB No. 1545-0123 2016

A Principal business activity Type or Print Name of partnership D Employer identification number Barber Service J&S Barbers 95-6767676 B Principal product or service Number, street, and room or suite no. If a P.O. box, see the instructions. E Date business started Barber Service 1023 Broadway 1/01/16 C Business code number City or town, state or province, country, and ZIP or foreign postal code F Total assets (see the instructions) 812111 New York, NY 10004 $ G Check applicable boxes: (1) ? Initial return (2) ? Final return (3) ? Name change (4) ? Address change (5) ? Amended return (6) ? Technical termination - also check (1) or (2) H Check accounting method: (1) ? Cash (2) ? Accrual (3) ? Other (specify) ? I Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year ? 2 J Check if Schedules C and M-3 are attached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? Caution. Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information. 1a Gross receipts or sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1a b Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1b c Balance. Subtract line 1b from line 1a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1c 2 Cost of goods sold (attach Form 1125-A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 Ordinary income (loss) from other partnerships, estates, and trusts (attach statement) . . . . . . 4 5 Net farm profit (loss) (attach Schedule F (Form 1040)) . . . . . . . . . . . . . . . . . . . . . . . . . 5 6 Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . . . . . . . . . 6 7 Other income (loss) (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8 Total income (loss). Combine lines 3 through 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 Salaries and wages (other than to partners) (less employment credits) . . . . . . . . . . . . . 9 10 Guaranteed payments to partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11 Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12 Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 16a Depreciation (if required, attach Form 4562) . . . . . . . . . . . . . . . . . . . . . 16a b Less depreciation reported on Form 1125-A and elsewhere on return . . 16b 16c 17 Depletion (Do not deduct oil and gas depletion.) . . . . . . . . . . . . . . . . . . . . . . . . . 17 18 Retirement plans, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 19 Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 20 Other deductions (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplies . . . . . 20 21 Total deductions. Add the amounts shown in the far right column for lines 9 through 20 . . . . . . 21 22 Ordinary business income (loss). Subtract line 21 from line 8 . . . . . . . . . . . . . . . . . . . . . . . 22 Sign

Here 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 general partner or limited liability company member manager) is based on all information of which preparer has any knowledge. ? ?

May the IRS discuss this return with the preparer shown below (see instructions)? ? Yes ? No Signature of general partner or limited liability company member manager Date Paid Preparer Use Only Print/Type preparer's name Preparer's signature Date Check ? if self-employed PTIN Firm's name ? Firm's EIN ? Firm's address ? Phone no. For Paperwork Reduction Act Notice, see separate instructions.

Cat. No. 11390Z

Form 1065 (2016)

Form 1065 (2016) Page 2 Schedule B Other Information 1 What type of entity is filing this return? Check the applicable box: Yes No a ? Domestic general partnership b ? Domestic limited partnership c ? Domestic limited liability company d ? Domestic limited liability partnership e ? Foreign partnership f ? Other ? 2 At any time during the tax year, was any partner in the partnership a disregarded entity, a partnership (including an entity treated as a partnership), a trust, an S corporation, an estate (other than an estate of a deceased partner), or a nominee or similar person? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X 3 At the end of the tax year:

a Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or tax-exempt organization, or any foreign government own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership? For rules of constructive ownership, see instructions. If "Yes," attach Schedule B-1, Information on Partners Owning 50% or More of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X b Did any individual or estate own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership? For rules of constructive ownership, see instructions. If "Yes," attach Schedule B-1, Information on Partners Owning 50% or More of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X 4 At the end of the tax year, did the partnership: a Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of stock entitled to vote of any foreign or domestic corporation? For rules of constructive ownership, see instructions. If "Yes," complete (i) through (iv) below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X (i) Name of Corporation (ii) Employer Identification Number (if any) (iii) Country of Incorporation (iv) Percentage Owned in Voting Stock

b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If "Yes," complete (i) through (v) below . . . X (i) Name of Entity (ii) Employer

Identification

Number (if any) (iii) Type of

Entity (iv) Country of Organization (v) Maximum Percentage Owned in Profit, Loss, or Capital

Yes No 5 Did the partnership file Form 8893, Election of Partnership Level Tax Treatment, or an election statement under section 6231(a)(1)(B)(ii) for partnership-level tax treatment, that is in effect for this tax year? See Form 8893 for more details. X 6 Does the partnership satisfy all four of the following conditions? a The partnership's total receipts for the tax year were less than $250,000. b The partnership's total assets at the end of the tax year were less than $1 million. c Schedules K-1 are filed with the return and furnished to the partners on or before the due date (including extensions) for the partnership return. d The partnership is not filing and is not required to file Schedule M-3 . . . . . . . . . . . . . . . . . . . . . . . . . . X If "Yes," the partnership is not required to complete Schedules L, M-1, and M-2; Item F on page 1 of Form 1065; or Item L on Schedule K-1. 7 Is this partnership a publicly traded partnership as defined in section 469(k)(2)? . . . . . . . . . . . . . . . . . . . . X 8 During the tax year, did the partnership have any debt that was cancelled, was forgiven, or had the terms modified so as to reduce the principal amount of the debt? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X 9 Has this partnership filed, or is it required to file, Form 8918, Material Advisor Disclosure Statement, to provide information on any reportable transaction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X 10 At any time during calendar year 2016, did the partnership have an interest in or a signature or other authority over a financial account in a foreign country (such as a bank account, securities account, or other financial account)? See the instructions for exceptions and filing requirements for FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). If "Yes," enter the name of the foreign country. ? X Form 1065 (2016)

Form 1065 (2016) Page 3 Schedule B Other Information (continued) Yes No 11 At any time during the tax year, did the partnership receive a distribution from, or was it the grantor of, or transferor to, a foreign trust? If "Yes," the partnership may have to file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. See instructions . . . . . . . . . . . . . . . . . . . . . X 12a Is the partnership making, or had it previously made (and not revoked), a section 754 election? . . . . . . . . . . .. X See instructions for details regarding a section 754 election. b Did the partnership make for this tax year an optional basis adjustment under section 743(b) or 734(b)? If "Yes," attach a statement showing the computation and allocation of the basis adjustment. See instructions . . . . . . . . . X c Is the partnership required to adjust the basis of partnership assets under section 743(b) or 734(b) because of a substantial built-in loss (as defined under section 743(d)) or substantial basis reduction (as defined under section 734(d))? If "Yes," attach a statement showing the computation and allocation of the basis adjustment. See instructions X 13 Check this box if, during the current or prior tax year, the partnership distributed any property received in a like-kind exchange or contributed such property to another entity (other than disregarded entities wholly owned by the partnership throughout the tax year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?? 14 At any time during the tax year, did the partnership distribute to any partner a tenancy-in-common or other undivided interest in partnership property? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X 15 If the partnership is required to file Form 8858, Information Return of U.S. Persons With Respect To Foreign Disregarded Entities, enter the number of Forms 8858 attached. See instructions ? 16 Does the partnership have any foreign partners? If "Yes," enter the number of Forms 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, filed for this partnership. ? X 17 Enter the number of Forms 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, attached to this return. ? 18a Did you make any payments in 2016 that would require you to file Form(s) 1099? See instructions . . X b If "Yes," did you or will you file required Form(s) 1099? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Enter the number of Form(s) 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, attached to this return. ? 20 Enter the number of partners that are foreign governments under section 892. ? 21 During the partnership?s tax year, did the partnership make any payments that would require it to file Form 1042 and 1042-S under chapter 3 (sections 1441 through 1464) or chapter 4 (sections 1471 through 1474)? . . . . 22 Was the partnership a specified domestic entity required to file Form 8938 for the tax year (See the Instructions for Form 8938)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Designation of Tax Matters Partner (see instructions) Enter below the general partner or member-manager designated as the tax matters partner (TMP) for the tax year of this return: Name of designated TMP ? Identifying number of TMP ? If the TMP is an entity, name of TMP representative ? Phone number of TMP ? Address of designated TMP ?

Form 1065 (2016)

Form 1065 (2016) Page 4 Schedule K Partners' Distributive Share Items Total amount 1 Ordinary business income (loss) (page 1, line 22) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 Net rental real estate income (loss) (attach Form 8825) . . . . . . . . . . . . . . . . . . . . . . . . 2 3a Other gross rental income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . 3a b Expenses from other rental activities (attach statement). . . . . . . 3b c Other net rental income (loss). Subtract line 3b from line 3a . . . . . . . . . . . . . . . . . . . . . 3c 4 Guaranteed payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5 Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6 Dividends: a Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6a b Qualified dividends . . . . . . . . . . . . . . . . . . . . 6b 7 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8 Net short-term capital gain (loss) (attach Schedule D (Form 1065)) . . . . . . . . . . . . 8 9a Net long-term capital gain (loss) (attach Schedule D (Form 1065)) . . . . . . . . . . . . . 9a b Collectibles (28%) gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . 9b c Unrecaptured section 1250 gain (attach statement) . . . . . . . . . 9c 10 Net section 1231 gain (loss) (attach Form 4797) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11 Other income (loss) (see instructions)Type ? 11 12 Section 179 deduction (attach Form 4562) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13a Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13a b Investment interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13b c Section 59(e)(2) expenditures:(1) Type ? _ _ _ _ _ _ _ _ _ _ _ _ _(2) Amount ? 13c(2) d Other deductions (see instructions)Type ? 13d 14a Net earnings (loss) from self-employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14a b Gross farming or fishing income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14b c Gross nonfarm income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14c 15a Low-income housing credit (section 42(j)(5)). . . . . . . . . . . . . . . . . . . . . . . . . . . . 15a b Low-income housing credit (other) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15b c Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable) 15c d Other rental real estate credits (see instructions) Type ? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 15d e Other rental credits (see instructions) Type ? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 15e f Other credits (see instructions) Type ? 15f 16a Name of country or U.S. possession ? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ b Gross income from all sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16b c Gross income sourced at partner level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16c Foreign gross income sourced at partnership level d Passive category ? _ _ _ _ _ _ _ _ eGeneral category ? _ _ _ _ _ _ _ _ _ fOther ? 16f Deductions allocated and apportioned at partner level g Interest expense ? _ _ _ _ _ _ _ _ _ _ _ _ _ _hOther . . . . . . . . . . . . . . . . . . . . . . . . ? 16h Deductions allocated and apportioned at partnership level to foreign source income i Passive category ? _ _ _ _ _ _ _ _ jGeneral category ? _ _ _ _ _ _ _ _ _ kOther ? 16k l Total foreign taxes (check one): ?Paid?Accrued? . . . . . . . . . . . . . . . . . . . . 16l m Reduction in taxes available for credit (attach statement) . . . . . . . . . . . . . . . . . . . . . . 16m n Other foreign tax information (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17a Post-1986 depreciation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17a b Adjusted gain or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17b c Depletion (other than oil and gas) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17c d Oil, gas, and geothermal properties?gross income . . . . . . . . . . . . . . . . . . . . . . . . 17d e Oil, gas, and geothermal properties?deductions . . . . . . . . . . . . . . . . . . . . . . . . . 17e f Other AMT items (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17f 18a Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18a b Other tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18b c Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18c 19a Distributions of cash and marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . 19a b Distributions of other property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19b 20a Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20a b Investment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20b c Other items and amounts (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form 1065 (2016)

Form 1065 (2016) Page 5 Analysis of Net Income (Loss) 1 Net income (loss). Combine Schedule K, lines 1 through 11. From the result, subtract the sum of Schedule K, lines 12 through 13d, and 16l . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 Analysis by partner type: (i) Corporate (ii) Individual

(active) (iii) Individual (passive) (iv) Partnership (v) Exempt Organization (vi)

Nominee/Other a General partners b Limited partners Schedule L Balance Sheets per Books Beginning of tax year End of tax year Assets (a) (b) (c) (d) 1 Cash . . . . . . . . . . . . . . . . . . . . . 2a Trade notes and accounts receivable b Less allowance for bad debts . . . . . 3 Inventories . . . . . . . . . . . . . . . . . 4 U.S. government obligations . . . . . 5 Tax-exempt securities . . . . . . . . . 6 Other current assets (attach statement) . . . 7a Loans to partners (or persons related to partners) b Mortgage and real estate loans . . . . . 8 Other investments (attach statement) 9a Buildings and other depreciable assets . . . b Less accumulated depreciation . . . . 10a Depletable assets . . . . . . . . . . . . . . . . . . . . . b Less accumulated depletion . . . . . . . . . . . . . 11 Land (net of any amortization) . . . . . . . . . . . 12a Intangible assets (amortizable only) . b Less accumulated amortization . . . . . 13 Other assets (attach statement) . . . . 14 Total assets . . . . . . . . . . . . . . . . . . . Liabilities and Capital 15 Accounts payable . . . . . . . . . . . 16 Mortgages, notes, bonds payable in less than 1 year 17 Other current liabilities (attach statement) . 18 All nonrecourse loans . . . . . . . . . 19a Loans from partners (or persons related to partners) b Mortgages, notes, bonds payable in 1 year or more 20 Other liabilities (attach statement) . . . 21 Partners' capital accounts . . . . . . . . 22 Total liabilities and capital . . . . . . . Schedule M-1 Reconciliation of Income (Loss) per Books With Income (Loss) per Return Note. The partnership may be required to file Schedule M-3 (see instructions). 1 Net income (loss) per books . . . . . . . . . . . 2 Income included on Schedule K, lines 1, 2, 3c, 5, 6a, 7, 8, 9a, 10, and 11, not recorded on books this year (itemize): _ _ _ _ _ _ _ _ 3 Guaranteed payments (other than health insurance) . . . . . . . . . . . . . . . . . . . . . . . . 4 Expenses recorded on books this year not included on Schedule K, lines 1 through 13d, and 16l (itemize): a Depreciation $ _ _ _ _ _ _ _ _ _ _ _ _ _ _ b Travel and entertainment $ _ _ _ _ _ _ _ 5 Add lines 1 through 4 . . . . . . . . . . . . . . . . 6 Income recorded on books this year not included on Schedule K, lines 1 through 11 (itemize): a Tax-exempt interest $ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 7 Deductions included on Schedule K, lines 1 through 13d, and 16l, not charged against book income this year (itemize): a Depreciation $ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8 Add lines 6 and 7 . . . . . . . . . . . . . . . . . . . . 9 Income (loss) (Analysis of Net Income (Loss), line 1). Subtract line 8 from line 5 . . Schedule M-2 Analysis of Partners' Capital Accounts 1 Balance at beginning of year . . . . . . . . . . . 6 Distributions: a Cash . . . . . . . . . . . . . . . . . 2 Capital contributed: a Cash . . . . . . . . . . . b Property . . . . . . . . . . . . . . . b Property . . . . . . . . 7 Other decreases (itemize):_ _ _ _ _ _ _ _ _ 3 Net income (loss) per books . . . . . . . . . . . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 4 Other increases (itemize): _ _ _ _ _ _ _ _ 8 Add lines 6 and 7 . . . . . . . . . . . . . . . . . . . . 5 Add lines 1 through 4 . . . . . . . . . . . . . . . . 9 Balance at end of year. Subtract line 8 from line 5 Form 1065 (2016)

651113

? Final K-1 ? Amended K-1 OMB No. 1545-0123 Schedule K-1

(Form 1065) 2016

Part III Partner's Share of Current Year Income,

Deductions, Credits, and Other Items Department of the Treasury Internal Revenue Service For calendar year 2016, or taxyear beginning , 2016

ending , 20

1 Ordinary business income (loss)

15 Credits 2 Net rental real estate income (loss)

3 Other net rental income (loss)

16 Foreign transactions 4 Guaranteed payments

5 Interest income

6a Ordinary dividends

6b Qualified dividends

7 Royalties

8 Net short-term capital gain (loss)

9a Net long-term capital gain (loss)

17 Alternative minimum tax (AMT) items 9b Collectibles (28%) gain (loss)

9c Unrecaptured section 1250 gain

10 Net section 1231 gain (loss)

18 Tax-exempt income and nondeductible expenses

11 Other income (loss)

12 Section 179 deduction 19

A Distributions

13 Other deductions

20 Other information

A 14 Self-employment earnings (loss)

Partner's Share of Income, Deductions,

Credits, etc. ? See back of form and separate instructions. Part IInformation About the Partnership APartnership's employer identification number

95-6767676 BPartnership's name, address, city, state, and ZIP code

J&S Barbers

1023 Broadway

New York, NY 10004 CIRS Center where partnership filed return

Cincinnati, OH D? Check if this is a publicly traded partnership (PTP)

Part IIInformation About the Partner EPartner's identifying number

765-12-4326 FPartner's name, address, city, state, and ZIP code

Emily Jackson

456 E. 70th Street

New York, NY 10006 G?General partner or LLC member-manager?Limited partner or other LLC member H?Domestic partner?Foreign partner I1What type of entity is this partner? I2If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here ? JPartner's share of profit, loss, and capital (see instructions): BeginningEnding Profit % % Loss % % Capital % % KPartner's share of liabilities at year end: Nonrecourse . . . . . . . . . . . . . . . . .$ Qualified nonrecourse financing . . . .$ Recourse . . . . . . . . . . . . . . . . . ..$ LPartner's capital account analysis: Beginning capital account . . . . . . . . .$ Capital contributed during the year$ Current year increase (decrease) . . .$ Withdrawals & distributions . . . . . . . $ ( ) Ending capital account . . . . . . . . . . .$

*See attached statement for additional information.

?Tax basis?GAAP?Section 704(b) book ?Other (explain)

MDid the partner contribute property with a built-in gain or loss? ?Yes?No

If "Yes," attach statement (see instructions) For Paperwork Reduction Act Notice, see Instructions for Form 1065.

IRS.gov/form1065

Cat. No. 11394R

Schedule K-1 (Form 1065) 2016

Note: Page 2 of Emily Jackson's K-1 has intentionally been omitted.

651113

? Final K-1 ? Amended K-1 OMB No. 1545-0123 Schedule K-1

(Form 1065) 2016

Part III Partner's Share of Current Year Income,

Deductions, Credits, and Other Items Department of the Treasury Internal Revenue Service For calendar year 2016, or taxyear beginning , 2016

ending , 20

1 Ordinary business income (loss)

15 Credits 2 Net rental real estate income (loss)

3 Other net rental income (loss)

16 Foreign transactions 4 Guaranteed payments

5 Interest income

6a Ordinary dividends

6b Qualified dividends

7 Royalties

8 Net short-term capital gain (loss)

9a Net long-term capital gain (loss)

17 Alternative minimum tax (AMT) items 9b Collectibles (28%) gain (loss)

9c Unrecaptured section 1250 gain

10 Net section 1231 gain (loss)

18 Tax-exempt income and nondeductible expenses

11 Other income (loss)

12 Section 179 deduction 19

A Distributions

13 Other deductions

20 Other information

A 14 Self-employment earnings (loss)

Partner's Share of Income, Deductions,

Credits, etc. ? See back of form and separate instructions. Part IInformation About the Partnership APartnership's employer identification number

95-6767676 BPartnership's name, address, city, state, and ZIP code

J&S Barbers

1023 Broadway

New York, NY 10004 CIRS Center where partnership filed return

Cincinnati, OH D? Check if this is a publicly traded partnership (PTP)

Part IIInformation About the Partner EPartner's identifying number

466-74-9932 FPartner's name, address, city, state, and ZIP code

James Stewart

436 E. 63rd Street

New York, NY 10012 G?General partner or LLC member-manager?Limited partner or other LLC member H?Domestic partner?Foreign partner I1What type of entity is this partner? I2If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here ? JPartner's share of profit, loss, and capital (see instructions): BeginningEnding Profit % % Loss % % Capital % % KPartner's share of liabilities at year end: Nonrecourse . . . . . . . . . . . . . . . . . .$ Qualified nonrecourse financing . . . .$ Recourse . . . . . . . . . . . . . . . . . . . .$ LPartner's capital account analysis: Beginning capital account . . . . . . . . .$ Capital contributed during the year$ Current year increase (decrease) . . .$ Withdrawals & distributions . . . . . . . $ ( ) Ending capital account . . . . . . . . . . $

*See attached statement for additional information.

?Tax basis?GAAP?Section 704(b) book ?Other (explain)

MDid the partner contribute property with a built-in gain or loss? ?Yes?No

If "Yes," attach statement (see instructions) For Paperwork Reduction Act Notice, see Instructions for Form 1065.

IRS.gov/form1065

Cat. No. 11394R

Schedule K-1 (Form 1065) 2016

Schedule K-1 (Form 1065) 2016 Page 2 This list identifies the codes used on Schedule K-1 for all partners and provides summarized reporting information for partners who file Form 1040. For detailed reporting and filing information, see the separate Partner's Instructions for Schedule K-1 and the instructions for your income tax return. 1.Ordinary business income (loss). Determine whether the income (loss) is passive or nonpassive and enter on your return as follows. Report on Passive lossSee the Partner's Instructions Passive incomeSchedule E, line 28, column (g) Nonpassive lossSchedule E, line 28, column (h) Nonpassive incomeSchedule E, line 28, column (j) 2.Net rental real estate income (loss) See the Partner's Instructions 3.Other net rental income (loss) Net incomeSchedule E, line 28, column (g) Net lossSee the Partner's Instructions 4.Guaranteed paymentsSchedule E, line 28, column (j) 5.Interest incomeForm 1040, line 8a 6a.Ordinary dividendsForm 1040, line 9a 6b.Qualified dividendsForm 1040, line 9b 7.RoyaltiesSchedule E, line 4 8.Net short-term capital gain (loss)Schedule D, line 5 9a.Net long-term capital gain (loss)Schedule D, line 12 9b.Collectibles (28%) gain (loss) 28% Rate Gain Worksheet, line 4 (Schedule D instructions) 9c.Unrecaptured section 1250 gainSee the Partner's Instructions 10.Net section 1231 gain (loss)See the Partner's Instructions 11.Other income (loss) Code AOther portfolio income (loss)See the Partner's Instructions BInvoluntary conversionsSee the Partner's Instructions CSec. 1256 contracts & straddlesForm 6781, line 1 DMining exploration costs recaptureSee Pub. 535 ECancellation of debtForm 1040, line 21 or Form 982 FOther income (loss)See the Partner's Instructions 12.Section 179 deductionSee the Partner's Instructions 13.Other deductions ACash contributions (50%)}See the Partner's Instructions BCash contributions (30%) CNoncash contributions (50%) DNoncash contributions (30%) ECapital gain property to a 50% organization (30%) FCapital gain property (20%) GContributions (100%) HInvestment interest expenseForm 4952, line 1 IDeductions?royalty incomeSchedule E, line 19 JSection 59(e)(2) expendituresSee the Partner's Instructions KDeductions?portfolio (2% floor)Schedule A, line 23 LDeductions?portfolio (other)Schedule A, line 28 MAmounts paid for medical insuranceSchedule A, line 1 or Form 1040, line 29 NEducational assistance benefitsSee the Partner's Instructions ODependent care benefitsForm 2441, line 12 PPreproductive period expensesSee the Partner's Instructions QCommercial revitalization deduction from rental real estate activitiesSee Form 8582 instructions RPensions and IRAsSee the Partner's Instructions SReforestation expense deductionSee the Partner's Instructions TDomestic production activities informationSee Form 8903 instructions UQualified production activities incomeForm 8903, line 7b VEmployer's Form W-2 wagesForm 8903, line 17 WOther deductionsSee the Partner's Instructions 14.Self-employment earnings (loss) Note: If you have a section 179 deduction or any partner-level deductions, See the Partner's Instructions before completing Schedule SE. ANet earnings (loss) from self-employment Schedule SE, Section A or B BGross farming or fishing income See the Partner's Instructions CGross non-farm income See the Partner's Instructions 15.Credits ALow-income housing credit (section 42(j)(5)) from pre-2008 buildings}See the Partner's Instructions BLow-income housing credit (other) from pre-2008 buildings CLow-income housing credit (section 42(j)(5)) from post-2007 buildings DLow-income housing credit (other) from post-2007 buildings EQualified rehabilitation expenditures (rental real estate) FOther rental real estate credits GOther rental credits HUndistributed capital gains credit Form 1040, line 73, check box a IBiofuel producer credit}See the Partner's Instructions JWork opportunity credit KDisabled access credit

CodeReport on LEmpowerment zone employment credit}See the Partner's Instructions MCredit for increasing research activities NCredit for employer social security and Medicare taxes OBackup withholding POther credits 16.Foreign transactions AName of country or U.S. possession}Form 1116, Part I BGross income from all sources CGross income sourced at partner level Foreign gross income sourced at partnership level DPassive category}Form 1116, Part I EGeneral category FOther Deductions allocated and apportioned at partner level GInterest expense Form 1116, Part I HOther Form 1116, Part I Deductions allocated and apportioned at partnership level to foreign source income IPassive category}Form 1116, Part I JGeneral category KOther Other information LTotal foreign taxes paidForm 1116, Part II MTotal foreign taxes accruedForm 1116, Part II NReduction in taxes available for creditForm 1116, line 12 OForeign trading gross receiptsForm 8873 PExtraterritorial income exclusionForm 8873 QOther foreign transactionsSee the Partner's Instructions 17.Alternative minimum tax (AMT) items APost-1986 depreciation adjustment}See the Partner's Instructions and the Instructions for Form 6251 BAdjusted gain or loss CDepletion (other than oil & gas) DOil, gas, & geothermal?gross income EOil, gas, & geothermal?deductions FOther AMT items 18.Tax-exempt income and nondeductible expenses ATax-exempt interest income Form 1040, line 8b BOther tax-exempt income See the Partner's Instructions CNondeductible expenses See the Partner's Instructions 19.Distributions ACash and marketable securities}See the Partner's Instructions BDistribution subject to section 737 COther property 20.Other information AInvestment incomeForm 4952, line 4a BInvestment expensesForm 4952, line 5 CFuel tax credit informationForm 4136 DQualified rehabilitation expenditures (other than rental real estate)See the Partner's Instructions EBasis of energy propertySee the Partner's Instructions FRecapture of low-income housing credit (section 42(j)(5))Form 8611, line 8 GRecapture of low-income housing credit (other)Form 8611, line 8 HRecapture of investment creditSee Form 4255 IRecapture of other creditsSee the Partner's Instructions JLook-back interest?completed long-term contractsSee Form 8697 KLook-back interest?income forecast methodSee Form 8866 LDispositions of property with section 179 deductions}See the Partner's Instructions MRecapture of section 179 deduction NInterest expense for corporate partners OSection 453(l)(3) information PSection 453A(c) information QSection 1260(b) information RInterest allocable to production expenditures SCCF nonqualified withdrawals TDepletion information?oil and gas UReserved VUnrelated business taxable income WPrecontribution gain (loss) XSection 108(i) information YNet investment income ZOther information

Comprehensive Problem 10-1 Emily Jackson (Social Security number 765-12-4326) and James Stewart (Social Security number 466-74-9932) are partners in a partnership that owns and operates a barber shop. The partnership's first year of operation is 2016. Emily and James divide income and expenses equally. The partnership name is J&S Barbers, it is located at 1023 Broadway, New York, NY 10004, and its Federal ID number is 95-6767676. The 2016 financial statements for the partnership are presented below. J&S Barbers Income Statement for the Year Ending December 31, 2016 Gross income from operations $371,600 Deductions: Salaries to employees 94,000 Payroll taxes 10,000 Supplies 9,000 Rent 45,000 Depreciation 5,100 Short-term capital loss 2,000 Charitable contributions 500 Net income $206,000 Partners' withdrawals (each partner) $80,000 J&S Barbers Balance Sheet as of December 31, 2016 Assets: Cash $100,850 Accounts receivable Equipment Accum. depreciation 10,000 $32,000 (5,100) 26,900 $137,750 Liabilities and Capital: Accounts payable $29,750 Notes payable 22,000 Partners' capital ($20,000 contributed by each partner) 86,000 $137,750 Emily lives at 456 E. 70th Street, New York, NY 10006, and James lives at 436 E. 63rd Street, New York, NY 10012. Required: Complete J&S Barbers' Form 1065 and Emily and James' Schedule K-1. Do not fill in Schedule D for the capital loss, Form 4562 for depreciation, or Schedule B-1 related to ownership of the partnership. Make realistic assumptions about any missing data. If an amount box does not require an entry or the answer is zero, enter "0". If required, round your answers to nearest dollar. If required, enter a "loss" as a negative number on the tax form. Do not enter deductions as negative numbers. Form 1065 Department of the Treasury Internal Revenue Service U.S. Return of Partnership Income For calendar year 2016, or tax year beginning _ _ _ _ , 2016, ending _ _ _ , 20_ _ _ . Information about Form 1065 and its separate instructions is at www.irs.gov/form1065. A Principal business activity Name of partnership Barber Service B Principal product or service Barber Service D Employ number J&S Barbers 95-6767 Number, street, and room or suite no. If a P.O. box, see the Type instructions. or Print 1023 Broadway E Date bu City or town, state or province, country, and ZIP or foreign postal code F Total as instructi C Business code number 812111 G Check applicable boxes: New York, NY 10004 (1) Initial return (2) Final return (5) Amended return H Check accounting method: 1/01/16 (1) Cash (3) Name change ( (6) Technical termination (2) Accrual (3) Other (specify) I Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year J Check if Schedules C and M-3 are attached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Caution. Include only trade or business income and expenses on lines 1a through 22 below. See the instructions 1a Gross receipts or sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1a b Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1b c Balance. Subtract line 1b from line 1a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Cost of goods sold (attach Form 1125-A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16a Depreciation (if required, attach Form 4562) . . . . . . . . . . . . . . . . . . . . . 16a b Less depreciation reported on Form 1125-A and elsewhere on return . . 16b 17 Depletion (Do not deduct oil and gas depletion.) . . . . . . . . . . . . . . . . . . . . . . . . . 18 Retirement plans, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Other deductions (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplies . . . . . 21 Total deductions. Add the amounts shown in the far right column for lines 9 through 20 . . . . . . 22 Ordinary business income (loss). Subtract line 21 from line 8 . . . . . . . . . . . . . . . . . . . . . . . Sign Here Under penalties of perjury, I declare that I have examined this return, including accompanying schedu to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (othe or limited liability company member manager) is based on all information of which preparer has any May the IRS discuss this ret shown below (see instructio Signature of general partner or limited liability company member manager Paid Preparer Use Only Date Print/Type preparer's name Preparer's signature Date Check employed Firm's name Firm's EIN Firm's address Phone no. For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11390Z Form 1065 (2016) Schedule B Other Information 1 What type of entity is filing this return? Check the applicable box: a Domestic general partnership b c Domestic limited liability company d e Foreign partnership f 2 At any time during the tax year, was any partner in the partnership a disregarded entity, a partnership (includ treated as a partnership), a trust, an S corporation, an estate (other than an estate of a deceased partner), or a similar person? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 At the end of the tax year: a Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or organization, or any foreign government own, directly or indirectly, an interest of 50% or more in the profit, capital of the partnership? For rules of constructive ownership, see instructions. If "Yes," attach Schedule BInformation on Partners Owning 50% or More of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b Did any individual or estate own, directly or indirectly, an interest of 50% or more in the profit, loss, or capi partnership? For rules of constructive ownership, see instructions. If "Yes," attach Schedule B-1, Informatio Owning 50% or More of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 At the end of the tax year, did the partnership: a Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all class entitled to vote of any foreign or domestic corporation? For rules of constructive ownership, see instructions complete (i) through (iv) below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) Name of Corporation (ii) Employer Identification Number (if any) (iii) Country of Incorpor b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in the pro loss, or capital in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If "Yes," complete (i) thro (v) below . . . (i) Name of Entity (ii) Employer Identification Number (if any) (iii) Type of Entity (iv) Country of Organization 5 Did the partnership file Form 8893, Election of Partnership Level Tax Treatment, or an election statement u section 6231(a)(1)(B)(ii) for partnership-level tax treatment, that is in effect for this tax year? See Form 889 details. 6 Does the partnership satisfy all four of the following conditions? a The partnership's total receipts for the tax year were less than $250,000. b The partnership's total assets at the end of the tax year were less than $1 million. c Schedules K-1 are filed with the return and furnished to the partners on or before the due date (including ex for the partnership return. d The partnership is not filing and is not required to file Schedule M-3 . . . . . . . . . . . . . . . . . . . . . . . . . . If "Yes," the partnership is not required to complete Schedules L, M-1, and M-2; Item F on page 1 of Form Item L on Schedule K-1. 7 Is this partnership a publicly traded partnership as defined in section 469(k)(2)? . . . . . . . . . . . . . . . . . . . . 8 During the tax year, did the partnership have any debt that was cancelled, was forgiven, or had the terms mo as to reduce the principal amount of the debt? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Has this partnership filed, or is it required to file, Form 8918, Material Advisor Disclosure Statement, to pro information on any reportable transaction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 At any time during calendar year 2016, did the partnership have an interest in or a signature or other authori financial account in a foreign country (such as a bank account, securities account, or other financial account instructions for exceptions and filing requirements for FinCEN Form 114, Report of Foreign Bank and Fina Accounts (FBAR). If "Yes," enter the name of the foreign country. Form 1065 (2016) Schedule B Other Information (continued) 11 At any time during the tax year, did the partnership receive a distribution from, or was it the grantor of, or to, a foreign trust? If "Yes," the partnership may have to file Form 3520, Annual Return To Report Transac Foreign Trusts and Receipt of Certain Foreign Gifts. See instructions . . . . . . . . . . . . . . . . . . . . . 12a Is the partnership making, or had it previously made (and not revoked), a section 754 election? . . . . . . . . . See instructions for details regarding a section 754 election. b Did the partnership make for this tax year an optional basis adjustment under section 743(b) or 734(b)? If attach a statement showing the computation and allocation of the basis adjustment. See instructions . . . . . c Is the partnership required to adjust the basis of partnership assets under section 743(b) or 734(b) because substantial built-in loss (as defined under section 743(d)) or substantial basis reduction (as defined under s 734(d))? If "Yes," attach a statement showing the computation and allocation of the basis adjustment. See 13 Check this box if, during the current or prior tax year, the partnership distributed any property received in exchange or contributed such property to another entity (other than disregarded entities wholly owned by t partnership throughout the tax year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 At any time during the tax year, did the partnership distribute to any partner a tenancy-in-common or othe interest in partnership property? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 If the partnership is required to file Form 8858, Information Return of U.S. Persons With Respect To Fore Disregarded Entities, enter the number of Forms 8858 attached. See instructions 16 Does the partnership have any foreign partners? If "Yes," enter the number of Forms 8805, Foreign Partne Information Statement of Section 1446 Withholding Tax, filed for this partnership. 17 Enter the number of Forms 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, at this return. 18a Did you make any payments in 2016 that would require you to file Form(s) 1099? See instructions . . b If "Yes," did you or will you file required Form(s) 1099? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Enter the number of Form(s) 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, attached to this return. 20 Enter the number of partners that are foreign governments under section 892. 21 During the partnership's tax year, did the partnership make any payments that would require it to file Form 1042-S under chapter 3 (sections 1441 through 1464) or chapter 4 (sections 1471 through 1474)? . . . . 22 Was the partnership a specified domestic entity required to file Form 8938 for the tax year (See the Instruc Form 8938)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Designation of Tax Matters Partner (see instructions) Enter below the general partner or member-manager designated as the tax matters partner (TMP) for the tax year Name of designate d TMP Identifying number of TMP If the TMP is an entity, name of TMP representative Address of designate d TMP Phone number of TMP Form 1065 (2016) 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). . . . . . . . . . . . . . . . . . . . . . . . . . 3a b Expenses from other rental activities (attach statement). . . . . . . 3b c Other net rental income (loss). Subtract line 3b from line 3a . . . . . . . . . . . . . . . . . . . . . 4 Guaranteed payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Dividends: a Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b Qualified dividends . . . . . . . . . . . . . . . . . . . . 6b 7 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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) . . . . . . . . . . . . . . . . . . . . . . . . . . 9b c Unrecaptured section 1250 gain (attach statement) . . . . . . . . . 9c 10 Net section 1231 gain (loss) (attach Form 4797) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Other income (loss) (see instructions) Type 12 Section 179 deduction (attach Form 4562) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13a Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b Investment interest expense