Partnership Tax Return

Isaac Bruno (111-11-1111), Elaine Happy (111-11-1112), David Duke (111-11-1113), and Mae Scout (111-11-1114) are equal partners in the Beas Buzz partnership. Isaacs address is 2953 Tamarindo Avenue, Bloomington, IL 61701. Beas Buzz produces and sells honey and honey-based products (such as lotion, shampoo, etc.). Beas Buzz is located at 3515 Honey Drive, Normal, IL 61761. The principal business activity is Gift, Novelty & Souvenir Stores, and the principal product or service is Honey-based Products. The partnership uses the cash basis and calendar tax year, and it began operations on August 6, 2005. Beas Buzzs EIN is 44-4444444. The business code for Beas Buzz is 453220. Beas Buzz uses the cost method of accounting for inventory and is not subject to 263A. Isaac is the designated tax matters partner.

The following information was taken from the partnerships income statement for the current year:

Revenues
Sales	$1,002,000
Cost of goods sold	(341,000)
Returns and allowances	(45,390)
Interest income from bank deposits	1,600
Interest income from tax-exempt bonds	1,015
Gain/loss on sale of securities	1,500
Qualified dividend income	1,700
Total Revenues	621,425
Expenses
Advertising	16,700
Charitable contributions	5,500
Regular Depreciation	19,960
Section 179 Depreciation	37,000
Guaranteed payment, Elaine Happy, office manager	58,000
Insurance premiums	19,490
Interest expense (mortgage and operating debt)	12,350
Meals and entertainment (subject to 50% limit)	1,000
Office expense	46,000
Payroll taxes	13,800
Property tax	4,800
Salaries and wages	150,000
Utilities	13,150
Total Expenses	397,750
Net income for books	223,675

Beas Buzz took advantage of Section 179 depreciation this year for $37,000. Beas Buzz uses the same cost recovery methods for both tax and financial purposes. There is no depreciation adjustment for alternative minimum tax purposes.

Beas Buzz sold some tax-exempt securities during the year. The securities were originally purchased on 10/2/2010 for $8,000 and were sold on 12/10/2015 for $9,500.

The firms activities do not constitute qualified production activities for purposes of the Section 199 deduction. All 4 partners withdrew $45,000 cash each during the year.

Beas Buzzs book balance sheet as of December 31, 2015 is as follows:

	Beginning	Ending
Cash	225,010	??
Inventory	65,000	72,000
Tax-exempt securities	33,750	25,750
Building and equipment	1,225,000	1,242,000
Accumulated depreciation	(753,850)	(810,810)
Total Assets	$794,900	??
Line of credit for operations	$46,000	$34,000
Mortgage	645,630	513,387
Capital, Isaac	25,820	??
Capital, Elaine	25,820	??
Capital, David	25,820	??
Capital, Mae	25,820	??
Total Liabilities and Capital	$794,900	??

Capital accounts are left blank intentionally. Please calculate the ending capital account for each partner. When you have that information you can back into the cash number.

The line of credit is recourse debt.

A check figure contained within the 1065 is found on page 5. Analysis of Net Income line 1 (at the top of the page) should equal Line 9 of the Schedule M-1.

If you are using the H&R Block software:

Check the box for:

Automatically calculate reconciliation items.

Adjust ending cash balance for Schedule L to account for rounding differences.

You do not need informational letters to accompany the partners Schedule K-1s.

You do not need to print the Client Documents, Federal Statements or Federal Worksheets.

Override line 16a on page 1 for Depreciation and line 12 on page 4 for Section 179 Depreciation.

Mark all partners as Domestic Partner and A Active Individual (Schedule K-1, Part II, H and I1)

Just a warning: The special allocation is perhaps the trickiest part of this problem (if you are doing this in the software).

You also do not need a Schedule M-3, 4562 or 3520. If they are appearing in your list of printed documents (if using the software), you can uncheck them individually.

Check figures: Page 1 line 22 = 260,860; Schedule K line 14c = 318,860