Partnership (Form 1065) Fall 2018

Rick Smith, Bill Thomas, Diane Asche, and Jill Renteria are equal owners in "STAR, LLC" - a partnership engaged in HR consulting.Pertinent information regarding STAR is summarized below.

Social security numbers are as follows; Rick - 648-98-4321; Bill - 486-63-4297; Diane - 855-21-1750; and Jill - 896-49-2341.Rick is the President of the company.

The address of the company is 2835 Bay View Drive, Wilmington, NC 26812.

The company was organized and began operations on January 1, 2012.

The business code is 561900.

The federal identification number is 67-1234576

The company uses the cash method of accounting and the calendar year for reporting.

The company claimed $8,119 depreciation for book purposes, but $11,919 for tax purposes (under a MACRS methodology).Assume none of the depreciation creates a tax preference or adjustment for AMT purposes.The company is NOT a personal holding company.

All loan borrowings were used exclusively for acquisition of equipment, consequently, all interest is considered business interest.

No compensation was paid to Thomas, Asche, or Renteria, but each of the four owners withdrew $45,000 as a distribution of operating profits.There was no distribution of any non-cash property.

The equipment loan is nonrecourse debt to the owners.All initial equity contributions were paid equally and each individual owns 25% of the partnership units.

None of the owners sold any portion of their ownership interests during the year.

The company has no available tax credits and is not subject to AMT.

The company's operations are entirely restricted to the local geographic area in North Carolina.All owners are U.S. citizens.The company had no foreign operations, no foreign bank accounts, and no interest in any foreign trusts or other corporations.The company is not publicly traded.

The company is not subject to the consolidated audit procedures.The company files its return in Cincinnati, OH.

Rick Smith lives at 572 Knowles Ct., Wilmington, NC 26811, Bill Thomas lives at 942 Richland Dr., Wilmington, NC 26812; Diane Asche lives at 1342 Coastal Rd., Wilmington, NC 26812; and Jill Renteria lives at 550 Rocker Ave., Wilmington, NC 26812.

The company's marketable securities represent small investments (<1% ownership) in a number of publicly traded companies and mutual funds.

The company sold its holdings of XYZ Corp. (carried as Marketable Securities on the balance sheet) on July 10 for $5,000.The corporation purchased this investment several years ago for $9,000.

(The proceeds from this sale are listed as a cash receipt below.The company has no prior-year capital gains or losses.)

The current income statement for the company reflected book net income of $ 199,900 AFTER book depreciation has been taken on the equipment, and the loss on the sale of XYZ Corporation.The following information was taken from the company's financial statements for the current year.

Cash Receipts:

Fees collected$755,000

Taxable qualified dividend income 3,600

Taxable business interest income2,400

Tax Exempt interest2,600

Proceeds from sale of XYZ Corp. common stock$5,000

Total Receipts$768,600

Cash Disbursements:

Guaranteed Payment to Rick Smith$120,000

Distributions to partners ($45K each) 180,000

Customer Refunds3.000

Office Rent26,000

Utilities6,700

Administrative employee salaries314,000

Business & Professional Licenses2,000

Cash Contribution to United Way 1,000

Business Meals (100%)3,600

Business Travel7,000

Office supplies & expense12,000

Accounting (Professional) fees8,000

Advertising7,000

Taxes (Payroll, State, Local)28,600

Business interest (on equipment loan) 4,481

Principal payments on equipment loan15,000

General Liability Insurance Expense3,200

Equipment rental5,000

Total Disbursements746,581

Journal entries have been made to record regular (book) depreciation in the amount of $8,119.MACRS tax depreciation was not recorded in the book records.

Principal payments against the equipment loan amounted to $15,000 for the year.

The balance sheets (book basis) for the company were as follows for the current year:

AccountJanuary 1, 2018December 31, 2018

Cash$86,576$?

Tax-exempt securities(at cost)52,00052,000

Marketable Securities(at cost)120,000?

Office furniture & equipment65,00065,000

Accumulated depreciation( 36,576)________?

Total assets$287,000$?

Nonrecourse equipment loan$47,000$?

Partner Capital - Smith$60,000$ ?

Partner Capital - Thomas$60,000$?

Partner Capital - Asche$60,000$?

Partner Capital - Renteria$ 60,000$_______?

Total liabilities and capital$ 287,000$ ?

Prepare the balace sheet and income statement for Star, LLC.