Only solve the 3 wrong answers (red X) in the Schedule K-1 (e.)
Amy and Mitchell share equally ( 50% ) in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $896,000, and the LLC has debts of $582,400 payable to unrelated parties. All debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. The following information about AM's operations for the current year is obtained from the LLC's records. * Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $407,680. Assume that all transactions are reflected in her beginning tax basis in the LLC inbeginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction. a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point. LLC interest at the beginning of the year: $ LLC interest at the end of the year: \& . b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter " 0 ". c. Based on the information provided, what other calculations is Amy required to make? Amy may be eligible to deduct up to % of the ordinary income as qualified business income under 199A and will make that calculation on her return. This deduction require a cash outflow by Amy or the LLC, and it affect her basis or capital account. As someone treated as a general partner, Amy's distributive share of the LLC's ordinary business income subject to self-employment tax and possibly the additional Medicare tax. Her from the LLC may be subject to the additional tax under 1411. d. Prepare Amy's tax basis capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending tax basis in the LLC interests as calculated in part (a)? e. Using the information from parts (a) to (d), prepare Amy's Schedule K-1 as if you were the preparer of AM Products LLC's tax return. Provide all information that Amy needs to the extent you can. Enter all amounts as positive numbers. Partner's share of profit, loss, and capital (see instructions): Check if decrease is due to sale or exchange of partnership interest Partner's share of liabilities: Check this box if Item K includes liability amounts from lower tier partnerships. M Did the partner contribute property with a built-in gain or loss? Yes \& No If "Yes," attach statement. See instructions. N Partner's Share of Net Unrecognized Section 704(c) Gain or (Loss) Beginning capital account . ...... $ Ending ................ $
