Partnership Tax Return Final

Federal Taxation II

Prepare UMPI Plumbings 2018 tax return from the following information provided. Tax forms required for the final, be sure to include Form 1065 and Schedule K-1 (Form 1065).

Helpful Hint: grading emphasis is placed on the most important parts of the form 1065; page 1 (1.a thru 22), page 4 (schedule K), page 5 (Analysis of Net Income (Loss), Schedule L, M-1, & M-2) and Schedule K-1 (form 1065). Use this as your guide to ensure you are completing all required parts of the final.

You do not need to complete Form 4562 Depreciation & Amortization. Ignore all AMT calculations and AMT related reporting items.

Information:

Sammie and Paul decided to venture out on their own and form their own plumbing company called UMPI Plumbing, LLC. (UMPI). They formed UMPI as a limited liability company (LLC). Sammie and Paul each own 50% of the company.

UMPI has several employees.

Information relating to UMPI and its owners:

Name of Company: UMPI Plumbing, LLC

Address: 181 Main Street

Presque Isle, ME 04769 (has not changed since inception)

Company formed and started: January 1, 2011

Accounting Method: Cash

Tax-year end: December 31

Employer Identification Number: 42-1234567

Members Profit/Loss/Capital membership interest is 50%.

See the following information for both partners:

Sammie Rogers

123 Happy Street

Presque Isle, ME 04769

SSN- 006-33-4281

Paul Johnson

321 Plumbers Road

Presque Isle, ME 04769

SSN: 008-22-4398

Profit/Loss/Capital membership interest is 50%.

Other information:

• UMPI is a domestic limited liability company
• Sammie and Paul are not related.
• Sammie and Paul are both U.S. citizens.
• Both Sammie and Paul are managing members.
• UMPI has not and did not file a Form 8893 or anything similar to it this year or in the past.
• UMPI is not a publicly traded partnership.
• During the year, no debt was cancelled or forgiven in relation to UMPI.
• UMPI is not required to file a Form 8918.
• UMPI did not have or control a foreign bank account or have authority over any such financial account.
• UMPI was not the grantor of or a transferor to a foreign trust.
• UMPI has never made a Section 754 election.
• UMPI has never entered a like-kind exchange or distributed a tenancy-in-common or other undivided interest in partnership property.
• UMPI has never been required to file Form 8858.
• UMPI 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.
• UMPI was not required to file any Form(s) 5471 during the year.
• Sammie is the Tax Matters Partner (TMP).
• Both Sammie and Paul are active in the business and work full-time for UMPI.
• The debt owed to First National Bank is a non-recourse obligation and neither Sammie nor Paul have guaranteed its repayment (see balance sheet below). This debt is not directly tied to any specific asset but is rather a debt secured against all of the assets of the company, with neither Sammie nor Paul personally responsible for its repayment.
• During the year, Sammie and Paul each contributed $20,000 to the capital of UMPI
• UMPI does not maintain any inventory. UMPI purchases supplies and has a policy of expensing such purchases as paid for tax and book purposes consistent with existing tax law.
• UMPI uses MACRS depreciation for both tax and book purposes.
• During the year, Sammie and Paul each received a $75,000 distribution from UMPI.
• The depreciation has been properly calculated for tax purposes. Ignore the requirement to prepare and attach form 4562 depreciation and amortization.

Financial Statements: Balance Sheet Assets: 12/31/17 12/31/18 Cash Tax-exempt Securities Building Less: Acc. Depreciation Equipment Less: Acc. Depreciation Land Total Assets: Liabilities and Capital: Note Payable-First National Bank Note Payable-Sammie Rogers Note Payable- Paul Johnson Capital Account-SR Capital Account-PJ Total Liabilities and Capital: $30,000 100,000 4,000,000 (551,282) 2,500,000 (1,481,400) 1,000,000 $5,597,318 $45,000 100,000 4,000,000 (653,842) 3,250,000 (2,231,663) 1,000,000 $5,509,495 $4,267,318 300,000 200,000 415,000415,000 $5,597,318 $4,046,673 300,000 200,000 481,411481,411 $5,509,495 Income Statement for the year ending December 31, 2018 \begin{tabular}{|c|c|} \hline Office Supplies & 3,420 \\ \hline Employee Training & 5,675 \\ \hline Advertising & 18,850 \\ \hline Plumbing supplies & 15,125 \\ \hline Meals & 13,740 \\ \hline Travel & 4,210 \\ \hline Gasoline & $158,675 \\ \hline Utilities & 24,940 \\ \hline Telephone & 16,830 \\ \hline Total Expenses: & $2,233,448 \\ \hline Net Income: & $242,822 \\ \hline \end{tabular} Financial Statements: Balance Sheet Assets: 12/31/17 12/31/18 Cash Tax-exempt Securities Building Less: Acc. Depreciation Equipment Less: Acc. Depreciation Land Total Assets: Liabilities and Capital: Note Payable-First National Bank Note Payable-Sammie Rogers Note Payable- Paul Johnson Capital Account-SR Capital Account-PJ Total Liabilities and Capital: $30,000 100,000 4,000,000 (551,282) 2,500,000 (1,481,400) 1,000,000 $5,597,318 $45,000 100,000 4,000,000 (653,842) 3,250,000 (2,231,663) 1,000,000 $5,509,495 $4,267,318 300,000 200,000 415,000415,000 $5,597,318 $4,046,673 300,000 200,000 481,411481,411 $5,509,495 Income Statement for the year ending December 31, 2018 \begin{tabular}{|c|c|} \hline Office Supplies & 3,420 \\ \hline Employee Training & 5,675 \\ \hline Advertising & 18,850 \\ \hline Plumbing supplies & 15,125 \\ \hline Meals & 13,740 \\ \hline Travel & 4,210 \\ \hline Gasoline & $158,675 \\ \hline Utilities & 24,940 \\ \hline Telephone & 16,830 \\ \hline Total Expenses: & $2,233,448 \\ \hline Net Income: & $242,822 \\ \hline \end{tabular}