Instructions: Another staff accountant at your firm is ill and cannot finish AAA Fast Plumbing's 2018 tax return. Please complete the return and necessary schedules based upon the facts presented below and the schedules provided. If required information is missing, use reasonable assumptions to fill in the gaps. Ignore all AMT calculations and AMT related reporting items. Michael Rodriguez and Devontae Johnson have been life-long friends. Both Michael and Devontae started to work for the same national plumbing repair company immediately after graduating from technical college. After nearly a decade of working for that same company, Michael and Devontae decided to venture out on their own and form their own plumbing company called AAA Fast Plumbing Repair (AAA). They formed AAA as a limited liability company (LLC). Michael and Devontae each own 50% of the company. The company has been successful primarily based upon reputation and the fact that AAA is available 24 hours a day, seven days a week. Although AAA charges a premium for after normal business hour calls, most of its competitors will not perform services past 9 p.m. and, thus, AAA finds itself often as one of the only available choices for middle of the night emergencies. AAA has several employees and because of implementing technology solutions to aid in its call dispatch program, AAA has been able to expand its service area to now include a three-county area instead of just one. Information relating to AAA and its owners is as follows: AAA Fast Plumbing Repair, LLC 1456 East Buena Vista Blvd. Los Angeles, CA 90001 (has not changed since inception) January 1, 2010 Cash December 31 Name of Company: Address: Company formed and started: Accounting Method: Tax-year end: Employer Identification Number:34-1234567 Members' Information: Michael Rodriguez 1515 West Bloomington Street Los Angeles, CA 90001 SSN-585-31-6060 Phone: 555-234-8745 Profit/Loss/Capital membership interest is 50%. Devontae Johnsorn 19 East Violet Circle Los Angeles, CA 90001 SSN: 397-29-9239 Phone: 555-213-0989 Profit/Loss/Capital membership interest is 50% Other information: AAA is a domestic limited liability company Michael and Devontae are not related. Michael and Devontae are both U.S. citizens. Both Michael and Devontae are managing members and use the GAAP-basis to track their capital accounts AAA has never had annual gross receipts in excess of $25,000,000. AAA has not and did not file a Form 8893 or anything similar to it this year or in the past. AAA is not a publicly traded partnership During the year, no debt was cancelled or forgiven in relation to AAA. All of AAA's activities constitute a qualified trade or business, and the salaries and wages expense represents W-2 wages paid by AAA in 2018 . The total unadjusted basis for all assets placed in service for the prior 10 years matches the book value of all assets reported on the balance sheet. AAA is not required to file a Form 8918 AAA did not have or control a foreign bank account or have authority over any such financial AAA was not the grantor of or a transferor to a foreign trust. AAA has never entered a like-kind exchange or distributed a tenancy-in-common or other AAA has never been required to file Form 8858. account. AAA has never made a Section 754 election. undivided interest in partnership property AAA was required to file Form(s) 1099 related to certain payments it made during the year and those forms were filed on a timely basis. AAA was not required to file any Form(s) 5471 during the year. Michael is the Partnership Representative. Both Michael and Devontae are active in the business and work full-time for AAA Financial Statements: Balance Sheet Assets: 12/31/17 12/31/18 Cash Tax-exempt Securities Building Less: Acc. Depreciation Equipment Less: Acc. Depreciation Land 30,000 100,000 4,000,000 (551,282) 2,500,000 (1,481,400) 1,000,000 45,000 100,000 4,000,000 (653,842) 3,250,000 (2,138,800 1,000,000 Total Assets: 5,597,318 5,602,358 Liabilities and Capital: Note Payable-First National Bank Note Payable-Michael Rodriguez Note Payable-Devontae Johnson $4,267,318 300,000 200,000 4,046,673 300,000 200,000 Capital Account-MR Capital Account-DJ 415,000 15,000 527,842.50 527,842.50 Total Liabilities and Capital: $5,597,318 5,602,358 Income Statement for the year ending December 31, 2018 tem Amount Income Service Revenue-Cash Service Revenue-Credit Cards Consulting Revenue-Cash Consulting Revenue-Credit Cards 343,565 $1,922,710 $50,950 155,005 Interest Income-First National Bank Municipal Bond Interest Income $1,540 $ 2,500 Total Income: $2,476,270 Expenses: Employee Salaries Guaranteed payment-MR Guaranteed payment-DJ Repairs and Maintenance-Trucks Rent Payroll Taxes Licensing Fees Property Taxes Interest Expense Depreciation Office Supplies Employee Training Advertising 515,735 $50,000 50,000 $ 113,415 35,000o $ 41,260 $1,750 $ 77,000 $235,000 $ 759,960 $ 3,420 $5,675 $ 18,850 $15,125 13,740 Plumbing supplies Meals (prior to disallowance) Plumbing supplies Meals (prior to disallowance) Travel Gasoline Utilities Telephone $15,125 13,740 4,210 158,675 $24,940 16,830 Total Expenses: 2,140,585 Net Income $ 335,685 Instructions: Another staff accountant at your firm is ill and cannot finish AAA Fast Plumbing's 2018 tax return. Please complete the return and necessary schedules based upon the facts presented below and the schedules provided. If required information is missing, use reasonable assumptions to fill in the gaps. Ignore all AMT calculations and AMT related reporting items. Michael Rodriguez and Devontae Johnson have been life-long friends. Both Michael and Devontae started to work for the same national plumbing repair company immediately after graduating from technical college. After nearly a decade of working for that same company, Michael and Devontae decided to venture out on their own and form their own plumbing company called AAA Fast Plumbing Repair (AAA). They formed AAA as a limited liability company (LLC). Michael and Devontae each own 50% of the company. The company has been successful primarily based upon reputation and the fact that AAA is available 24 hours a day, seven days a week. Although AAA charges a premium for after normal business hour calls, most of its competitors will not perform services past 9 p.m. and, thus, AAA finds itself often as one of the only available choices for middle of the night emergencies. AAA has several employees and because of implementing technology solutions to aid in its call dispatch program, AAA has been able to expand its service area to now include a three-county area instead of just one. Information relating to AAA and its owners is as follows: AAA Fast Plumbing Repair, LLC 1456 East Buena Vista Blvd. Los Angeles, CA 90001 (has not changed since inception) January 1, 2010 Cash December 31 Name of Company: Address: Company formed and started: Accounting Method: Tax-year end: Employer Identification Number:34-1234567 Members' Information: Michael Rodriguez 1515 West Bloomington Street Los Angeles, CA 90001 SSN-585-31-6060 Phone: 555-234-8745 Profit/Loss/Capital membership interest is 50%. Devontae Johnsorn 19 East Violet Circle Los Angeles, CA 90001 SSN: 397-29-9239 Phone: 555-213-0989 Profit/Loss/Capital membership interest is 50% Other information: AAA is a domestic limited liability company Michael and Devontae are not related. Michael and Devontae are both U.S. citizens. Both Michael and Devontae are managing members and use the GAAP-basis to track their capital accounts AAA has never had annual gross receipts in excess of $25,000,000. AAA has not and did not file a Form 8893 or anything similar to it this year or in the past. AAA is not a publicly traded partnership During the year, no debt was cancelled or forgiven in relation to AAA. All of AAA's activities constitute a qualified trade or business, and the salaries and wages expense represents W-2 wages paid by AAA in 2018 . The total unadjusted basis for all assets placed in service for the prior 10 years matches the book value of all assets reported on the balance sheet. AAA is not required to file a Form 8918 AAA did not have or control a foreign bank account or have authority over any such financial AAA was not the grantor of or a transferor to a foreign trust. AAA has never entered a like-kind exchange or distributed a tenancy-in-common or other AAA has never been required to file Form 8858. account. AAA has never made a Section 754 election. undivided interest in partnership property AAA was required to file Form(s) 1099 related to certain payments it made during the year and those forms were filed on a timely basis. AAA was not required to file any Form(s) 5471 during the year. Michael is the Partnership Representative. Both Michael and Devontae are active in the business and work full-time for AAA Financial Statements: Balance Sheet Assets: 12/31/17 12/31/18 Cash Tax-exempt Securities Building Less: Acc. Depreciation Equipment Less: Acc. Depreciation Land 30,000 100,000 4,000,000 (551,282) 2,500,000 (1,481,400) 1,000,000 45,000 100,000 4,000,000 (653,842) 3,250,000 (2,138,800 1,000,000 Total Assets: 5,597,318 5,602,358 Liabilities and Capital: Note Payable-First National Bank Note Payable-Michael Rodriguez Note Payable-Devontae Johnson $4,267,318 300,000 200,000 4,046,673 300,000 200,000 Capital Account-MR Capital Account-DJ 415,000 15,000 527,842.50 527,842.50 Total Liabilities and Capital: $5,597,318 5,602,358 Income Statement for the year ending December 31, 2018 tem Amount Income Service Revenue-Cash Service Revenue-Credit Cards Consulting Revenue-Cash Consulting Revenue-Credit Cards 343,565 $1,922,710 $50,950 155,005 Interest Income-First National Bank Municipal Bond Interest Income $1,540 $ 2,500 Total Income: $2,476,270 Expenses: Employee Salaries Guaranteed payment-MR Guaranteed payment-DJ Repairs and Maintenance-Trucks Rent Payroll Taxes Licensing Fees Property Taxes Interest Expense Depreciation Office Supplies Employee Training Advertising 515,735 $50,000 50,000 $ 113,415 35,000o $ 41,260 $1,750 $ 77,000 $235,000 $ 759,960 $ 3,420 $5,675 $ 18,850 $15,125 13,740 Plumbing supplies Meals (prior to disallowance) Plumbing supplies Meals (prior to disallowance) Travel Gasoline Utilities Telephone $15,125 13,740 4,210 158,675 $24,940 16,830 Total Expenses: 2,140,585 Net Income $ 335,685