Question
Instructions: Complete Anytime Plumbing, LLCs 2020 partnership tax return (Form 1065 and one Schedule K-1, as they are the same) based upon the facts presented.
Instructions:
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Complete Anytime Plumbing, LLCs 2020 partnership tax return (Form 1065 and one Schedule K-1, as they are the same) based upon the facts presented.
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Ignore all AMT calculations and AMT related reporting items.
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If any information is missing, use reasonable assumptions to fill in the gaps.
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The forms, schedules and instructions can be found at the IRS website (www.irs.gov). The instructions can be helpful in completing the forms.
Company Information:
Frankie Jones and Wayne Brown decided to form a plumbing company, available 24 hours a day, seven days a week, called Anytime Plumbing, LLC (AP). AP finds itself often as one of the only available choices for middle of the night emergencies and is, therefore, able to charge a premium for after-normal business hour calls. Because of this, and the companys reputation, the company has been very successful. The AP service area now includes three counties and the company has implemented technology to aid in call dispatch.
Name of Company: Anytime Plumbing, LLC
Address: 904 Fifth Avenue
Pittsburgh, PA 15222 (has not changed since inception)
Company formed and started: January 1, 2012
Accounting Method: Cash
Tax-year end: December 31
Employer Identification Number: 34-9876543
Members Information:
Frankie Jones
608 Franklin Street
Pittsburgh, PA 15222
SSN- 123-45-6789 Phone: 412-068-1993
Profit/Loss/Capital membership interest is 50%.
Wayne Brown
108 Sugar Hill Drive
Pittsburgh, PA 15222
SSN: 987-65-4321 Phone: 412-195-1018
Profit/Loss/Capital membership interest is 50%.
Financial Statements:
AP Income Statement For year ending December 31, 2020 | |
Income: | |
Service Revenue Cash | $ 543,565 |
Service Revenue Credit Cards | 1,922,710 |
Consulting Revenue Cash | 100,950 |
Consulting Revenue Credit Cards | 155,005 |
Other Income: | |
Interest Income Pittsburgh Bank | $ 2,540 |
Municipal Bond Interest Income | 3,500 |
Total Income | $ 2,728,270 |
Expenses: | |
Employee Salaries | $ 515,735 |
Guaranteed Payment FJ | 60,000 |
Guaranteed Payment WB | 60,000 |
Repairs and Maintenance Trucks | 113,415 |
Rent | 35,000 |
Payroll Taxes | 51,260 |
Licensing Fees | 1,750 |
Property Taxes | 77,000 |
Interest Expense | 335,000 |
Depreciation | 759,960 |
Office Supplies | 3,420 |
Employee Training | 15,675 |
Advertising | 20,850 |
Plumbing Supplies | 15,125 |
Meals (prior to disallowance) | 18,740 |
Travel | 4,210 |
Gasoline | 158,675 |
Utilities | 24,940 |
Telephone | 16,830 |
Total Expenses | $ 2,287,585 |
Net Income | $ 440,685 |
Balance Sheet:
12/31/2019 | 12/31/2020 | |
Assets: | ||
Cash | $ 50,000.00 | $ 85,000.00 |
Tax-exempt Securities | 115,000.00 | 115,000.00 |
Building | 4,000,000.00 | 4,000,000.00 |
Less: Accumulated Depreciation | (551,282.00) | (653,842.00) |
Equipment | 2,500,000.00 | 3,250,000.00 |
Less: Accumulated Depreciation | (1,481,400.00) | (2,138,800.00) |
Land | 1,200,000.00 | 1,200,000.00 |
Total Assets | $ 5,832,318.00 | $ 5,857,358.00 |
Liabilities and Capital: | ||
Notes Payable Pittsburgh Bank | $ 4,502,318.00 | $ 4,196,673.00 |
Notes Payable FJ | 300,000.00 | 300,000.00 |
Notes Payable WB | 200,000.00 | 200,000.00 |
Capital Account FJ | 415,000.00 | 580,342.50 |
Capital Account WB | 415,000.00 | 580,342.50 |
Total Liabilities and Capital | $ 5,832,318.00 | $ 5,857,358.00 |
Additional notes:
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AP is not a publicly traded partnership.
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AP is a domestic limited liability company
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AP did not have or control a foreign bank account or have authority over any such financial account.
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AP was not the grantor of or a transferor to a foreign trust.
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AP has never had annual gross receipts in excess of $25,000,000.
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AP has not and did not file a Form 8893 or anything similar to it this year or in the past.
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AP is not required to file a Form 8918.
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AP has never been required to file Form 8858.
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AP was not required to file any Form(s) 5471 during the year.
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AP has never made a Section 754 election.
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AP 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.
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AP has never entered a like-kind exchange or distributed a tenancy-in-common or other undivided interest in partnership property.
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AP uses MACRS depreciation for both tax and book purposes.
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AP did not claim Section 179 expense for any of the current year asset additions and has opted out of bonus depreciation for 3 and 5- year recovery period assets.
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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.
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During the year, AP acquired the following assets (all assets were placed in service on the acquisition dates as indicated below):
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Service Vans-new (not Luxury Automobiles) July 1, 2020 $500,000
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Plumbing Machinery/Equipment-new July 1, 2020 $250,000
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AP does not maintain any inventory. AP purchases supplies and has a policy of expensing such purchases as paid for tax and book purposes consistent with existing tax law.
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The debt owed to Pittsburgh Bank is a non-recourse obligation and neither Frankie nor Wayne have guaranteed its repayment (see balance sheet). This debt is not directly tied to any specific asset but is rather a debt secured against all of the assets of the company.
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During the year, no debt was cancelled or forgiven in relation to AP.
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All of APs activities constitute a qualified trade or business, and the salaries and wages expense represent W-2 wages paid by AP in 2020.
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Frankie and Wayne are not related.
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Frankie and Wayne are both U.S. citizens.
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Frankie is the Partnership Representative.
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Both Frankie and Wayne are managing members and use the GAAP-basis to track their capital accounts
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Both Frankie and Wayne are active in the business and work full-time for AP.
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During the year, Frankie and Wayne each contributed $20,000 to the capital of AP
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During the year, Frankie and Wayne each received a $75,000 distribution from AP.
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