For this question, the business is considered a partnership and all tax rates are for the current year.

Bob, Larry and Junior started a chili roasting company in 2009 called Chili Tales. Bob contributed $160,000 cash, Larry contributed $80,000 cash, and Junior contributed land in Las Cruces with an adjusted basis of $50,000 and a fair market value of $100,000. The property was subject to a $20,000 liability, which was also transferred into the business. Larry and Junior each own 25% of the entity, and Bob owns 50%. The Partial 2019 Income Statement for Chili Tales is provided. Chili Tales Income Statement For the Year Ended December 31, 2019 $ 625,000 195,000 $ 430,000 Sales Revenue Cost of Goods Sold Gross Profit Operating expenses: Selling and Administrative Expenses Rent Expense Officer Compensation - Bob Advertising Expense Depreciation Expense (Book equals Tax) Charitable Contribution - Save the Manatee Life Insurance Premiums Operating Income Other Income (Expense): Dividend Income from Alphabet Inc. Interest Income from Cheeze Bank Loss on Sale of Investments Net Income 80,000 78,000 70,000 8,000 5,500 5,000 2,500 249,000 181,000 4,000 2,000 (1,000) 5,000 186,000 $ A.) Since Bob is the general partner, can he issue himself a W-2 for the compensation? Why or why not? B.) Calculate the company's Nonseparately Stated Income. Show you calculations and label each amount. Refer to Form 1065 as a reference, since this is the same as Ordinary Income on page 1 of Form 1065. C.) During the year, the partnership took out a $80,000 loan for new equipment. They each guaranteed the loan. Calculate their ending basis, properly allocating and labeling dollar amounts. Begin with the Nonseparately Stated Income and Separately Stated Income and Expense items. Items Affecting Basis Total Amount Bob's Allocation 52,000 Larry's Allocation 17,000 Junior's Allocation 32,000 Basis, January 1, 2019 Bob, Larry and Junior started a chili roasting company in 2009 called Chili Tales. Bob contributed $160,000 cash, Larry contributed $80,000 cash, and Junior contributed land in Las Cruces with an adjusted basis of $50,000 and a fair market value of $100,000. The property was subject to a $20,000 liability, which was also transferred into the business. Larry and Junior each own 25% of the entity, and Bob owns 50%. The Partial 2019 Income Statement for Chili Tales is provided. Chili Tales Income Statement For the Year Ended December 31, 2019 $ 625,000 195,000 $ 430,000 Sales Revenue Cost of Goods Sold Gross Profit Operating expenses: Selling and Administrative Expenses Rent Expense Officer Compensation - Bob Advertising Expense Depreciation Expense (Book equals Tax) Charitable Contribution - Save the Manatee Life Insurance Premiums Operating Income Other Income (Expense): Dividend Income from Alphabet Inc. Interest Income from Cheeze Bank Loss on Sale of Investments Net Income 80,000 78,000 70,000 8,000 5,500 5,000 2,500 249,000 181,000 4,000 2,000 (1,000) 5,000 186,000 $ A.) Since Bob is the general partner, can he issue himself a W-2 for the compensation? Why or why not? B.) Calculate the company's Nonseparately Stated Income. Show you calculations and label each amount. Refer to Form 1065 as a reference, since this is the same as Ordinary Income on page 1 of Form 1065. C.) During the year, the partnership took out a $80,000 loan for new equipment. They each guaranteed the loan. Calculate their ending basis, properly allocating and labeling dollar amounts. Begin with the Nonseparately Stated Income and Separately Stated Income and Expense items. Items Affecting Basis Total Amount Bob's Allocation 52,000 Larry's Allocation 17,000 Junior's Allocation 32,000 Basis, January 1, 2019