I need help preparing the tax return for rock the ages llc. I've attached a pdf with all relevant information

Print Preview 6/19/16, 2:51 PM Chapter 10: Partnerships: Formation, Operation, and Basis Tax Return Problems Book Title: Corporations, Partnerships, Estates & Trusts Printed By: Jennifer Schindler (jli005@shsu.edu) 2016 Cengage Learning, Cengage Learning Chapter Review Tax Return Problems 1 Ryan Ross (111-11-1111), Oscar Omega (222-22-2222), Clark Carey (333-33-3333), and Kim Kardigan (444-444444) are equal active members in ROCK the Ages LLC. ROCK serves as agents and managers for prominent musicians in the Los Angeles area. The LLC's Federal ID number is 55-5555555. It uses the cash basis and the calendar year and began operations on January 1, 2003. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as Rhiannon, Elena Gomez, Tyler Quick, and Conjuring Dragons and has had a very profitable year. The following information was taken from the LLC's income statement for the current year: http:/g.cengage.com/staticbreader/ui/appsbreader/print_preview/print_preview.html Page 1 of 8 Print Preview 6/19/16, 2:51 PM During the past couple of years, ROCK has taken advantage of bonus depreciation and 179 deductions and fully remodeled the premises and upgraded its leasehold improvements. This year, ROCK wrapped up its remodel with the purchase of $20,000 of office furniture for which it will claim a 179 deduction. (For simplicity, assume that ROCK uses the same cost recovery methods for both tax and financial purposes.) There is no depreciation adjustment for alternative minimum tax purposes. ROCK invests much of its excess cash in non-dividend-paying growth stocks and tax-exempt securities. During the year, the LLC sold two securities. On June 15, 2014, ROCK purchased 1,000 shares of Tech, Inc. stock for $100,000; it sold those shares on December 15, 2014, for $80,000. On March 15, 2013, ROCK purchased 2,000 shares of BioLabs, Inc. stock for $136,000; it sold those shares for $160,000 on December 15, 2014. These transactions were reported to the IRS on Forms 1099-B; ROCK's basis in these shares was reported. http:/g.cengage.com/staticbreader/ui/appsbreader/print_preview/print_preview.html Page 2 of 8 Print Preview 6/19/16, 2:51 PM Net income per books is $840,000. The firm's activities do not constitute \"qualified production activities\" for purposes of the 199 deduction. On January 1, 2014, the members' capital accounts equaled $200,000 each. No additional capital contributions were made in 2014. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year. The LLC's balance sheet as of December 31, 2014, is as follows: Assume that all debt is shared equally by the members. Each member has personally guaranteed the debt of the LLC. The business code for \"Agents and Managers for Artists, Athletes, Entertainers, and Other Public Figures\" is 711410. The LLC's Form 1065 was prepared by Ryan Ross and sent to the Ogden, UT IRS Service Center. All members are active in LLC operations. a. Prepare Form 1065, pages 1, 4, and 5, for ROCK the Ages LLC. b. If you are using tax return preparation software, prepare Form 4562 and Schedule D. c. Prepare Schedule K-1 for Ryan Ross, 15520 W. Earlson Street, Pacific Palisades, CA 90272. http:/g.cengage.com/staticbreader/ui/appsbreader/print_preview/print_preview.html Page 3 of 8 Print Preview 6/19/16, 2:51 PM 2 On January 1, 2008, the Branson Company (EIN 22-2222222) and Porto Engineering, Inc. (EIN 33-3333333), formed Branto LLC (an equally owned joint venture). During its first four years, the LLC worked with the U.S. Department of Homeland Security and the National Transportation Safety Board to design and develop a specific device for airport passenger screening. Porto provides engineering expertise, and Branson provides high-tech manufacturing, selling, and distribution expertise. Early in 2013, the two governmental agencies recommended the product. In 2014, Branto's screening device was being succesfully marketed, sold, delivered, and installed in airports around the United States. The LLC uses the accrual method of accounting and the calendar year for reporting purposes. Its current address is 3750 Airport Boulevard, Seattle, WA, 98124. The following information was taken from the trial balance supporting the LLC's GAAP-basis (audited) financial statements for the 2014 calendar year: http:/g.cengage.com/staticbreader/ui/appsbreader/print_preview/print_preview.html Page 4 of 8 Print Preview 6/19/16, 2:51 PM The beginning and ending GAAP-basis balance sheets for the LLC were as follows at December 31, 2014: http:/g.cengage.com/staticbreader/ui/appsbreader/print_preview/print_preview.html Page 5 of 8 Print Preview 6/19/16, 2:51 PM The LLC uses the lower of cost or market method for valuing inventory. Branto is subject to 263A; for simplicity, assume that 263A costs are reflected in the same manner for book and tax purposes. Branto did not change its inventory accounting method during the year. There were no write-downs of inventory items, and Branto does not use the LIFO method. The LLC claimed $2,499,270 of depreciation expense for tax purposes (book depreciation is $1,275,000). All tax depreciation expense should be reported on Form 1125-A. The LLC placed $7.5 million of assets in service during the current year; this exceeds the threshold for eligibility for a 179 deduction. Current asset additions are treated as 5-year MACRS assets. The LLC has a positive adjustment of $98,100 for AMT purposes related to tax depreciation (tax depreciation exceeds that allowable for AMT purposes). All borrowings were used exclusively for business operations; consequently, none of the interest expense is considered investment interest expense. The LLC members were required to guarantee the debt related to the operating line of credit. The accounts payable, accrued warranty claim liabilities, and mortgage were not guaranteed by the members. The mortgage relates to the real property and is considered qualified nonrecourse financing. The http:/g.cengage.com/staticbreader/ui/appsbreader/print_preview/print_preview.html Page 6 of 8 Print Preview 6/19/16, 2:51 PM partners share equally in all LLC liabilities, because all initial contributions and all ongoing allocations and distributions are pro rata. The LLC's activities are eligible for the domestic production activities deduction (DPAD). For simplicity, assume that the LLC's qualified production activities income (QPAI) is $9.5 million. Assume the LLC's production-related W-2 wages are $10 million. Because of prior state losses and tax concessions, no current or deferred state income taxes are reported for financial purposes. No guaranteed payments were paid to either of the LLC members. Instead, the members each withdrew $3.4 million of cash during the year. None of the members contributed cash or other property to the LLC during the year. Both LLC members are U.S. Subchapter C corporations. Both members are classified as domestic corporations and \"LLC member-managers\" on Schedule K-1. The IRS's business code for \"Other specialty trade contractors\" is 238900. The LLC files its tax return in Ogden, Utah. Branson Company is located at 3750 Airport Boulevard, Seattle, WA 98124 (the same as the LLC's address). The capital account reconciliation on the partners' Schedules K-1 is prepared on a GAAP basis, as are the LLC's Schedules L and M-2. On the Analysis of Income (Loss), the IRS's instructions indicate that the amounts for any LLC members should be reported on the line for limited partners. The LLC is required to file Schedule M-3, Form 8916-A (Supplemental Attachment to Schedule M-3), and Schedule C with its Form 1065. The instructions for Schedule M-3 state that, if a line description is provided on pages 2 or 3 of the form (or on Form 8916), an income or expense item should be reported on the M-3 regardless of whether there is a book-tax difference. a. Prepare pages 1, 4, and 5 of Form 1065 and Form 1125-A for Branto LLC. Do not prepare Form 4562. Leave any items blank where insufficient information has been provided. Prepare supporting schedules as necessary if adequate information is provided. b. Prepare Schedule M-3 and Form 8916-A (page 1 only). Do not prepare Schedule C or page 2 of Form 8916-A. There are four book-tax differences (two temporary differences and two permanent differences). http:/g.cengage.com/staticbreader/ui/appsbreader/print_preview/print_preview.html Page 7 of 8 Print Preview 6/19/16, 2:51 PM c. Prepare Schedule K-1 for 50% LLC member Branson Company. Chapter 10: Partnerships: Formation, Operation, and Basis Tax Return Problems Book Title: Corporations, Partnerships, Estates & Trusts Printed By: Jennifer Schindler (jli005@shsu.edu) 2016 Cengage Learning, Cengage Learning 2016 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. http:/g.cengage.com/staticbreader/ui/appsbreader/print_preview/print_preview.html Page 8 of 8