Question
Note: This problem is for the 2018 tax year. Ryan Ross (111-11-1112), Oscar Omega (222-22-2223), Clark Carey (333-33-3334), and Kim Kardigan (444-44-4445) are equal active
Note: This problem is for the 2018 tax year.
Ryan Ross (111-11-1112), Oscar Omega (222-22-2223), Clark Carey (333-33-3334), and Kim Kardigan (444-44-4445) 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, 2006. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as Rhiannon, Burgundy Six, Elena Gomez, Tyler Quick, the Moonwalkers, 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.
Revenues | |
Fees and commissions | $4,800,000 |
Taxable interest income from bank deposits | 1,600 |
Tax-exempt interest | 3,200 |
Net gain on stock sales | 4,000 |
Total revenues | $4,808,800 |
Expenses | |
Advertising and public relations | $380,000 |
Charitable contributions | 28,000 |
Section 179 expense | 20,000 |
Employee salaries and wages | 1,000,000 |
Guaranteed payment (services), Ryan Ross, office manager | 800,000 |
Guaranteed payment (services), other members | 600,000 |
Entertainment, subject to 50% disallowance | 200,000 |
Travel | 320,000 |
Legal and accounting fees | 132,000 |
Office rentals paid | 80,000 |
Interest expense on operating line of credit | 10,000 |
Insurance premiums | 52,000 |
Office expense | 200,000 |
Payroll taxes | 92,000 |
Utilities | 54,800 |
Total expenses | $3,968,800 |
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. While the property is fully depreciated, it is not beyond the end of its depreciable life for purposes of the qualified business income deduction.
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, 2018, ROCK purchased 1,000 shares of Tech, Inc., stock for $100,000; it sold those shares on December 15, 2018, for $80,000. On March 15, 2017, ROCK purchased 2,000 shares of BioLabs, Inc., stock for $136,000; it sold those shares for $160,000 on December 15, 2018. These transactions were reported to the IRS on Forms 1099B; ROCK's basis in these shares was reported.
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, 2018, the members' capital accounts equaled $200,000 each. No additional capital contributions were made in 2018. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year. The LLC's balance sheet as of December 31, 2018, is as follows.
Beginning | Ending | ||
Cash | $444,000 | $?? | |
Tax-exempt securities | 120,000 | 120,000 | |
Marketable securities | 436,000 | 300,000 | |
Leasehold improvements, furniture, and equipment | 960,000 | 980,000 | |
Accumulated depreciation | (960,000) | (980,000) | |
Total assets | $1,000,000 | $?? | |
Operating line of credit | $200,000 | $160,000 | |
Capital, Ross | 200,000 | ?? | |
Capital, Omega | 200,000 | ?? | |
Capital, Carey | 200,000 | ?? | |
Capital, Kardigan | 200,000 | ?? | |
Total liabilities and capital | $1,000,000 | $?? | |
All debt is shared equally by the members. Each member has personally guaranteed the debt of the LLC. All members are active in LLC operations. the business code for the entity is 711410.
Statement 3 Form 1065, Schedule K, Line 20c Other Reportable Items | ||
Section 199A Qualified Business Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | ||
Section 199A W-2 Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | ||
Section 199A Unadjusted Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
20 A | Other information fill in the blank 27afb6febfc5003_11 | ||
AA | |||
AB | |||
14 A | Self-employment earnings (loss)
| Z |
|
I need help finding Section 199A Qualified Business Income. This goes under Line 20 Section Z on Schedule K-1.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started