Form 1065(2021) Form 1005 (porr) Analysis of Net Income (Loss) Page 5 \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|} \hline \multirow{4}{*}{\begin{tabular}{l} 1 \\ 2 \\ a \\ b \end{tabular}} & \multicolumn{9}{|c|}{\begin{tabular}{l} Net income ploss). Combine Schedule K, lines 1 through 11. From the result, subtract the sum of \\ Schedule K, lines 12 through 13d, and 21 . \\ Analysis by \end{tabular}} & \multirow[b]{2}{*}{ Nomineo/Other } \\ \hline & \multirow{3}{*}{\begin{tabular}{l} Analysis by \\ partner type: \\ General partners \\ Limited partners \end{tabular}} & (1) Corporate & \multicolumn{3}{|c|}{\begin{tabular}{l} (i) Individual \\ (active) \end{tabular}} & \multicolumn{2}{|c|}{\begin{tabular}{l} (iii) Individual \\ (passive) \end{tabular}} & \multirow[t]{3}{*}{ (D) Partnership } & \begin{tabular}{l} (v) Exampt. \\ Organization \end{tabular} & \\ \hline & & & & & & & & & & \\ \hline & & & & & & & & & & \\ \hline \multicolumn{6}{|c|}{ Schedule L Balance Sheets per Books } & \multicolumn{3}{|c|}{ Beginning of tax year } & \multicolumn{2}{|c|}{ End of tax year } \\ \hline \multicolumn{6}{|c|}{ Assets } & & (a) & (b) & (e) & (d) \\ \hline \multirow{2}{*}{\begin{tabular}{l} 1 \\ 2a \end{tabular}} & \multirow{2}{*}{\multicolumn{2}{|c|}{ Trade notes and accounts recelvable . }} & & & & & & 66.300 & & nas. \\ \hline & & & ... &.. & & & 22050 & & 16,172 & \\ \hline b & \multicolumn{2}{|c|}{ Less allowance for bad dobts . ... } & & & . & & 718 & 31.932 & 796 & 75.382 \\ \hline 3 & \multirow{2}{*}{\multicolumn{5}{|c|}{\begin{tabular}{l} Inventories \\ U.S. government obligations \end{tabular}}} & & & the aloo & & 202+00 \\ \hline 4 & & & & & & & & & & \\ \hline 5 & Tax-exempt securi & & . & . . . & & & & 1310 & & 1450 \\ \hline 6 & Other current asse & Is (attach statement) & & & & & & 11,100 & & 12300 \\ \hline 7a & Laans to parthers & or persons related to & par & intners) & & & & & & \\ \hline b & Mortgage and real & estate loans. . & & ++ & . & & & & & \\ \hline 8 & Other imvestmonts & (attach statement). & & , & .. & & & 5.900 & & 6500 \\ \hline 9a & Bulidings and othe & depreclable assets & . & . & & & 170,000 & & 482.000 & \\ \hline b & Less accumulated & depreciation . . & & & & & 2,179 & 16) 821 & 14538 & As? A6? \\ \hline 10a & Depietable assets & & . & . & & & & & & \\ \hline b & Less accumulated & depletion .... &. & .7. & & & & & & \\ \hline 11 & Land (net of any a & nortizationy.... & & & & & & & & \\ \hline 12a & Intangible assets (a & mortizable ondy) . & .. & -.. & & & & & & \\ \hline b & Less accumulated & amortization . . & . . & ... & & & & & & \\ \hline 13 & Other assets (attac & h staternent) ... & . . & . & & & & & & \\ \hline 14 & Total assets . . & & 6. & .... & & & & 466,162 & & 704,049 \\ \hline & Liabi & Ities and Capital & & & & & & & & \\ \hline 15 & Accounts payable &.. .5 & & : & & & & 45,700 & & 50,650 \\ \hline 16 & Mortgages, notes, & bonds payable in less & & tan1 year & & & & 3.656 & & 4.052 \\ \hline 17 & Other current liab & ties (attach statement) & & + & & & & 6.855 & & 7501 \\ \hline 18 & All nonrecourse lo & ins ....... & & . & & & & & & \\ \hline 19a & Loans from partne & Th lor persons related & to pa & partners) & & & & & & \\ \hlineb & Mortgages, hotes, & bonds payable in 1 ye & ear o & or more & & & & & & \\ \hline 20 & Other liabilities fatt & ach statement)... &.. & ... & - & & & a9. 551 & & 52,94 \\ \hline 21 & Partners' capital ac & scounts ...... & & & & & & 120,000 & & 682101 \\ \hline 22 & Total liabillies and & capital ..... & & & . & & & 465162 & & 2901044 \\ \hline Sche & \begin{tabular}{l} adule M-1 Reco \\ Note: \end{tabular} & \begin{tabular}{l} nciliation of Incom \\ The partnership may \end{tabular} & & Loss) p & & \begin{tabular}{l} Books W \\ tile Schod \end{tabular} & \begin{tabular}{l} With Incom \\ dulo M-3. Se \end{tabular} & \begin{tabular}{l} Seme (Loss) per Re \\ See instructions. \end{tabular} & Teturn & \\ \hline 1 & Net income (loss) p & ver books. .... & & & 91.5 & 0016 & Income rece & ecorded on books this ye. & year not included & \\ \hline 2 & \begin{tabular}{l} Income included on $ \\ 5,6a,7,8,9s,10, a \\ books this year fiemia \end{tabular} & \begin{tabular}{l} chedule K lines 1,2,3c, \\ nd 11 , not recorded on \\ e): \end{tabular} & & & & a & \begin{tabular}{l} on Schedil \\ Tax-exem \end{tabular} & \begin{tabular}{l} Whe K ines 1 through 11 \\ mpt interest $ \end{tabular} & 11 (temian) & \\ \hline 3 & \begin{tabular}{l} Guaranteed paymen \\ Insurance) \end{tabular} & nts fother than hoath & & & & 7 & \begin{tabular}{l} Deduction \\ lines 1 thr \end{tabular} & \begin{tabular}{l} ons included on \\ hrough 13d, and 21 . \end{tabular} & \begin{tabular}{l} Schedule K. \\ 1, not charged \end{tabular} & \\ \hline 4 & \begin{tabular}{l} Expenses recorded \\ not included on 5 \\ through 13d, and 2 \end{tabular} & \begin{tabular}{l} 1 on books this year \\ Schedule K, lines 1 \\ 1 (temize): \end{tabular} & & & & a & \begin{tabular}{l} against b \\ Depreciat \end{tabular} & \begin{tabular}{l} book income this ye \\ ation $ \end{tabular} & yoar (temize): & \\ \hline a & Deprociations & & & & & 8 & Add lines & os 6 and 7... & & \\ \hline b & Travel and entertain & ment $ & & & & 9 & Income o & (Poss) (Aralysis of & it Not income & \\ \hline 5 & Add lines 1 through & & & & & & (Loss), line & ne 1). Subtract line E & B from line 5 & \\ \hline Sche & edule M2 Analy & sis of Partners' Ca & ti. & AlACC & col & & & & & \\ \hline 1 & Bolance at beginnin & of year. . & & & & 6 & Distributio & tions: a Gash. & & \\ \hline 2 & Capital contriouted & a Cash .... & & & & & & b Property & & \\ \hline & & b Property & & & & 7 & Other dec & pcreases (itemize): & & \\ \hline \begin{tabular}{l} 3 \\ 4 \end{tabular} & Net income foss) (s & bee instructions) & & & & & & & & \\ \hline54 & \begin{tabular}{l} Other increases (fie \\ Add lines it through \end{tabular} & m4+ & & & & \begin{tabular}{l} 8 \\ 9 \end{tabular} & \begin{tabular}{l} Add lines \\ Belonceus. \end{tabular} & \begin{tabular}{l} is and 7 \\ fend of ver. Subtrict in \end{tabular} & tine stom ines & \\ \hline & & & & & & & & & & Form 1065 diost \\ \hline \end{tabular} $1,700 interest income from the partnership's bank checking account, $850 from qualified dividends, $1,800 short-term capital gain, and made a $5,500 cash charitable contribution. For the M-1, you can determine tax depreciation from page 1 of the 1065 , and book depreciation from Schedule L by examining the change in accumulated depreciation. Bicycle Ranch filed its Form 1065 at the IRS Center in Salt Lake City, Utah. The shops Employer Identification Number (EIN) is 58469002 and operates using the cash method. Joaquin Lozada's social security number is 231-05-4986, and he lives at 802 W. Johanna St, Stillwater, OK 74074. Claire Morant's social security number is 654981246, and she lives at 6598 W. 45th St, Stillwater, OK 74075. You are the paid preparer and the client has indicated the IRS may discuss the return with you. As needed, create a fictitious name, address, EIN, and phone number for your firm. a Domestic general partnership Domestic general partnership b Domestic limited partnership c. Domentic limited liability company - Foreign partnership d Domestic limited liability partnership 2 At the end of the tax year: a Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or taxexempt 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 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 3 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 ivi below. 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) in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If "Yes," complete fi throuph (v) below. X E 2022 Schedule K-1 (Form 100: + 2022 Schedule K-1 (Form 1065) 1/1 100%+[ Schedule K-1 (Form 1065) (Form 1065) begining Partner's Share of Income, Deductions, Credits, etc. Partnership Tax Project: The completed Form 1065 and K-1 forms are due as indicated on the syllabus. Instructions and project facts are included below. Instructions: You are to complete pages1, 4, and 5 of the Form 1065 and fill out the K-1's for both Claire Morant and Joaquin Lozada using the information provided on Form 1065, as well as the facts below. Forms and instructions to complete the project are available online through the IRS website. I have provided partially completed forms that you will use on Canvas (note: the IRS has not released the current year tax forms yet, so we will be using prior-year forms, which are all available). You can leave lines that equal 0 blank. You may also leave item K "Partner's share of liabilities" on each K-1 blank. Please attach a printed cover sheet to your deliverables that includes each group member's name, ID number, section number, and class time. The project will be turned in via Canvas - one PDF file per group. The purpose of this project is to help you become familiar with flow-through entities and navigating a tax return. The forms will be graded based on your effort and the completeness of the form. You do not need to get every line correct to get full points for this project. You may work with your classmates on the forms and tum in one set of forms. I reserve the right to include an exam question about the project. If you have questions, please use the discussion board on Canvas. Facts: Claire Morant and Joaquin Lozada formed a partnership, Bicycle Ranch, on July 15, 2018. As partners, they own and operate a bike shop in Stillwater at 6th South Main Street. The bike shop sells bicycles, repairs bicycles, and leads weekend rides for members of the bike shop. When forming the partnership, Claire and Joaquin contributed cash and property. No other contributions were made, and neither partner took a distribution from the partnership in 2018. At the beginning of 2021, Claire's beginning tax capital account is $200,000 and Joaquin's beginning tax capital account is $140,000 (i.e., beginning tax basis). You will use this on form K-1, Box L, "Partner's Capital Account Analysis". Claire works full time in the business, while Joaquin works approximately 70%. The partnership agreement states that Claire will receive a yearly guaranteed payment of $58,000 for services and Joaquin will receive $37,000 for services. Any profit or loss after guaranteed payment will be allocated 70% to Claire and 30% to Joaquin. During this tax year, Claire decided to contribute additional land to the partnership in the hopes that they can open a new store in the future. Her tax basis in the land is $65,000, and the FMV of the land is $312,000. Joaquin purchased a vacation home during the year and withdrew $41,000 from the partnership to cover the down payment. In addition to generating income and paying expenses, the partnership had the following item during the year, Bicycle Ranch received $3,200 tax-exempt interest from municipal bonds, Form 1065(2021) Form 1005 (porr) Analysis of Net Income (Loss) Page 5 \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|} \hline \multirow{4}{*}{\begin{tabular}{l} 1 \\ 2 \\ a \\ b \end{tabular}} & \multicolumn{9}{|c|}{\begin{tabular}{l} Net income ploss). Combine Schedule K, lines 1 through 11. From the result, subtract the sum of \\ Schedule K, lines 12 through 13d, and 21 . \\ Analysis by \end{tabular}} & \multirow[b]{2}{*}{ Nomineo/Other } \\ \hline & \multirow{3}{*}{\begin{tabular}{l} Analysis by \\ partner type: \\ General partners \\ Limited partners \end{tabular}} & (1) Corporate & \multicolumn{3}{|c|}{\begin{tabular}{l} (i) Individual \\ (active) \end{tabular}} & \multicolumn{2}{|c|}{\begin{tabular}{l} (iii) Individual \\ (passive) \end{tabular}} & \multirow[t]{3}{*}{ (D) Partnership } & \begin{tabular}{l} (v) Exampt. \\ Organization \end{tabular} & \\ \hline & & & & & & & & & & \\ \hline & & & & & & & & & & \\ \hline \multicolumn{6}{|c|}{ Schedule L Balance Sheets per Books } & \multicolumn{3}{|c|}{ Beginning of tax year } & \multicolumn{2}{|c|}{ End of tax year } \\ \hline \multicolumn{6}{|c|}{ Assets } & & (a) & (b) & (e) & (d) \\ \hline \multirow{2}{*}{\begin{tabular}{l} 1 \\ 2a \end{tabular}} & \multirow{2}{*}{\multicolumn{2}{|c|}{ Trade notes and accounts recelvable . }} & & & & & & 66.300 & & nas. \\ \hline & & & ... &.. & & & 22050 & & 16,172 & \\ \hline b & \multicolumn{2}{|c|}{ Less allowance for bad dobts . ... } & & & . & & 718 & 31.932 & 796 & 75.382 \\ \hline 3 & \multirow{2}{*}{\multicolumn{5}{|c|}{\begin{tabular}{l} Inventories \\ U.S. government obligations \end{tabular}}} & & & the aloo & & 202+00 \\ \hline 4 & & & & & & & & & & \\ \hline 5 & Tax-exempt securi & & . & . . . & & & & 1310 & & 1450 \\ \hline 6 & Other current asse & Is (attach statement) & & & & & & 11,100 & & 12300 \\ \hline 7a & Laans to parthers & or persons related to & par & intners) & & & & & & \\ \hline b & Mortgage and real & estate loans. . & & ++ & . & & & & & \\ \hline 8 & Other imvestmonts & (attach statement). & & , & .. & & & 5.900 & & 6500 \\ \hline 9a & Bulidings and othe & depreclable assets & . & . & & & 170,000 & & 482.000 & \\ \hline b & Less accumulated & depreciation . . & & & & & 2,179 & 16) 821 & 14538 & As? A6? \\ \hline 10a & Depietable assets & & . & . & & & & & & \\ \hline b & Less accumulated & depletion .... &. & .7. & & & & & & \\ \hline 11 & Land (net of any a & nortizationy.... & & & & & & & & \\ \hline 12a & Intangible assets (a & mortizable ondy) . & .. & -.. & & & & & & \\ \hline b & Less accumulated & amortization . . & . . & ... & & & & & & \\ \hline 13 & Other assets (attac & h staternent) ... & . . & . & & & & & & \\ \hline 14 & Total assets . . & & 6. & .... & & & & 466,162 & & 704,049 \\ \hline & Liabi & Ities and Capital & & & & & & & & \\ \hline 15 & Accounts payable &.. .5 & & : & & & & 45,700 & & 50,650 \\ \hline 16 & Mortgages, notes, & bonds payable in less & & tan1 year & & & & 3.656 & & 4.052 \\ \hline 17 & Other current liab & ties (attach statement) & & + & & & & 6.855 & & 7501 \\ \hline 18 & All nonrecourse lo & ins ....... & & . & & & & & & \\ \hline 19a & Loans from partne & Th lor persons related & to pa & partners) & & & & & & \\ \hlineb & Mortgages, hotes, & bonds payable in 1 ye & ear o & or more & & & & & & \\ \hline 20 & Other liabilities fatt & ach statement)... &.. & ... & - & & & a9. 551 & & 52,94 \\ \hline 21 & Partners' capital ac & scounts ...... & & & & & & 120,000 & & 682101 \\ \hline 22 & Total liabillies and & capital ..... & & & . & & & 465162 & & 2901044 \\ \hline Sche & \begin{tabular}{l} adule M-1 Reco \\ Note: \end{tabular} & \begin{tabular}{l} nciliation of Incom \\ The partnership may \end{tabular} & & Loss) p & & \begin{tabular}{l} Books W \\ tile Schod \end{tabular} & \begin{tabular}{l} With Incom \\ dulo M-3. Se \end{tabular} & \begin{tabular}{l} Seme (Loss) per Re \\ See instructions. \end{tabular} & Teturn & \\ \hline 1 & Net income (loss) p & ver books. .... & & & 91.5 & 0016 & Income rece & ecorded on books this ye. & year not included & \\ \hline 2 & \begin{tabular}{l} Income included on $ \\ 5,6a,7,8,9s,10, a \\ books this year fiemia \end{tabular} & \begin{tabular}{l} chedule K lines 1,2,3c, \\ nd 11 , not recorded on \\ e): \end{tabular} & & & & a & \begin{tabular}{l} on Schedil \\ Tax-exem \end{tabular} & \begin{tabular}{l} Whe K ines 1 through 11 \\ mpt interest $ \end{tabular} & 11 (temian) & \\ \hline 3 & \begin{tabular}{l} Guaranteed paymen \\ Insurance) \end{tabular} & nts fother than hoath & & & & 7 & \begin{tabular}{l} Deduction \\ lines 1 thr \end{tabular} & \begin{tabular}{l} ons included on \\ hrough 13d, and 21 . \end{tabular} & \begin{tabular}{l} Schedule K. \\ 1, not charged \end{tabular} & \\ \hline 4 & \begin{tabular}{l} Expenses recorded \\ not included on 5 \\ through 13d, and 2 \end{tabular} & \begin{tabular}{l} 1 on books this year \\ Schedule K, lines 1 \\ 1 (temize): \end{tabular} & & & & a & \begin{tabular}{l} against b \\ Depreciat \end{tabular} & \begin{tabular}{l} book income this ye \\ ation $ \end{tabular} & yoar (temize): & \\ \hline a & Deprociations & & & & & 8 & Add lines & os 6 and 7... & & \\ \hline b & Travel and entertain & ment $ & & & & 9 & Income o & (Poss) (Aralysis of & it Not income & \\ \hline 5 & Add lines 1 through & & & & & & (Loss), line & ne 1). Subtract line E & B from line 5 & \\ \hline Sche & edule M2 Analy & sis of Partners' Ca & ti. & AlACC & col & & & & & \\ \hline 1 & Bolance at beginnin & of year. . & & & & 6 & Distributio & tions: a Gash. & & \\ \hline 2 & Capital contriouted & a Cash .... & & & & & & b Property & & \\ \hline & & b Property & & & & 7 & Other dec & pcreases (itemize): & & \\ \hline \begin{tabular}{l} 3 \\ 4 \end{tabular} & Net income foss) (s & bee instructions) & & & & & & & & \\ \hline54 & \begin{tabular}{l} Other increases (fie \\ Add lines it through \end{tabular} & m4+ & & & & \begin{tabular}{l} 8 \\ 9 \end{tabular} & \begin{tabular}{l} Add lines \\ Belonceus. \end{tabular} & \begin{tabular}{l} is and 7 \\ fend of ver. Subtrict in \end{tabular} & tine stom ines & \\ \hline & & & & & & & & & & Form 1065 diost \\ \hline \end{tabular} $1,700 interest income from the partnership's bank checking account, $850 from qualified dividends, $1,800 short-term capital gain, and made a $5,500 cash charitable contribution. For the M-1, you can determine tax depreciation from page 1 of the 1065 , and book depreciation from Schedule L by examining the change in accumulated depreciation. Bicycle Ranch filed its Form 1065 at the IRS Center in Salt Lake City, Utah. The shops Employer Identification Number (EIN) is 58469002 and operates using the cash method. Joaquin Lozada's social security number is 231-05-4986, and he lives at 802 W. Johanna St, Stillwater, OK 74074. Claire Morant's social security number is 654981246, and she lives at 6598 W. 45th St, Stillwater, OK 74075. You are the paid preparer and the client has indicated the IRS may discuss the return with you. As needed, create a fictitious name, address, EIN, and phone number for your firm. a Domestic general partnership Domestic general partnership b Domestic limited partnership c. Domentic limited liability company - Foreign partnership d Domestic limited liability partnership 2 At the end of the tax year: a Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or taxexempt 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 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 3 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 ivi below. 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) in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If "Yes," complete fi throuph (v) below. X E 2022 Schedule K-1 (Form 100: + 2022 Schedule K-1 (Form 1065) 1/1 100%+[ Schedule K-1 (Form 1065) (Form 1065) begining Partner's Share of Income, Deductions, Credits, etc. Partnership Tax Project: The completed Form 1065 and K-1 forms are due as indicated on the syllabus. Instructions and project facts are included below. Instructions: You are to complete pages1, 4, and 5 of the Form 1065 and fill out the K-1's for both Claire Morant and Joaquin Lozada using the information provided on Form 1065, as well as the facts below. Forms and instructions to complete the project are available online through the IRS website. I have provided partially completed forms that you will use on Canvas (note: the IRS has not released the current year tax forms yet, so we will be using prior-year forms, which are all available). You can leave lines that equal 0 blank. You may also leave item K "Partner's share of liabilities" on each K-1 blank. Please attach a printed cover sheet to your deliverables that includes each group member's name, ID number, section number, and class time. The project will be turned in via Canvas - one PDF file per group. The purpose of this project is to help you become familiar with flow-through entities and navigating a tax return. The forms will be graded based on your effort and the completeness of the form. You do not need to get every line correct to get full points for this project. You may work with your classmates on the forms and tum in one set of forms. I reserve the right to include an exam question about the project. If you have questions, please use the discussion board on Canvas. Facts: Claire Morant and Joaquin Lozada formed a partnership, Bicycle Ranch, on July 15, 2018. As partners, they own and operate a bike shop in Stillwater at 6th South Main Street. The bike shop sells bicycles, repairs bicycles, and leads weekend rides for members of the bike shop. When forming the partnership, Claire and Joaquin contributed cash and property. No other contributions were made, and neither partner took a distribution from the partnership in 2018. At the beginning of 2021, Claire's beginning tax capital account is $200,000 and Joaquin's beginning tax capital account is $140,000 (i.e., beginning tax basis). You will use this on form K-1, Box L, "Partner's Capital Account Analysis". Claire works full time in the business, while Joaquin works approximately 70%. The partnership agreement states that Claire will receive a yearly guaranteed payment of $58,000 for services and Joaquin will receive $37,000 for services. Any profit or loss after guaranteed payment will be allocated 70% to Claire and 30% to Joaquin. During this tax year, Claire decided to contribute additional land to the partnership in the hopes that they can open a new store in the future. Her tax basis in the land is $65,000, and the FMV of the land is $312,000. Joaquin purchased a vacation home during the year and withdrew $41,000 from the partnership to cover the down payment. In addition to generating income and paying expenses, the partnership had the following item during the year, Bicycle Ranch received $3,200 tax-exempt interest from municipal bonds