Please answer letters A through E below.

Susan James and Roberto Rodriguez are equal members in SmallBiz Consultants, LLC ("SBC"), a limited liability company. Both members are active in the management of the business. SBC provides marketing services to small businesses in Las Vegas, Nevada. Its federal employer identification number is 40-9871955. SBC uses the accrual method of accounting for both financial accounting and tax reporting purposes. It began its trade or business on July 2, 2007 Its business address is 7998 West Central Avenue, Las Vegas, Nevada 89111. The beginning and ending balance sheets for SBC for the 2019 calendar year are as follows: Beginning Ending Cash Accounts Receivables Investments Furniture & Equipment Accumulated Depreciation Prepaid Expenses - Current Total Assets $68,659 153,825 167,951 248,445 (131,260) 12.123 $519,743 $101,200 178,654 124,951 450,645 (179,790) 18.665 $694,325 Accounts Payables Deferred Revenue Operating Line-of-Credit (Long-Term) Capital - Susan James Capital - Roberto Rodriguez Total Liabilities & Capital $59,243 50,000 60,000 175,250 175,250 $519,743 $66,479 65,000 145,600 208,623 208.623 $694,325 The following information is from SBC's income statement for the year ended December 31, 2019: $785,300 2,410 Sales Revenue Interest Income on bank deposits Interest Income from Nevada State Construction Bonds Gain/ (loss) from Sales of Assets Total Revenue 3,350 13.300 $804,360 Employee Wages Payroll Taxes Guaranteed Payments Repairs & Maintenance Depreciation Meals - Before 50% Disallowance Entertainment Travel Legal & Accounting (Professional Fees) Interest Expense Commissions Contribution to United Way (Cash) Rent Expense (Building) Employee Benefits (Excluding Members) Insurance (Property & Casualty) Supplies Miscellaneous - parking tickets, tax penalties Total Expenses $178,200 39,850 26,400 4,440 48,530 19,650 12,750 24,440 36,000 5,010 22,000 20,000 72,083 28,875 4,360 2,400 626 $545,614 Net Income $258,746* *Net income is before monthly distributions to members as discussed below in Guaranteed Payments and Member Distributions. Capital Additions and Depreciation During 2019, SBC acquired and placed-in-service the following capital assets on the dates provided: Computers and peripheral equipment - March 15, 2019 (new) 2019 BMW Series 5 - June 2, 2019 (new) Office Furniture - June 30, 2019 (used) Office Equipment - August 25, 2019 (new) $19,700 $62,000 $8,000 $112,500 For income tax purposes, SBC's policy is to maximize its tax depreciation. Thus, it will claim MACRS, Bonus and Sec. 179 depreciation when available. Consequently, SBC has claimed either bonus or Sec. 179 depreciation on all its assets placed-in- service prior to January 1, 2019. Thus, these assets are fully depreciated for income tax purposes as of December 31, 2018. There is no Alternative Minimum Tax depreciation preference item for 2019. There were no Sec. 1231 asset sales or disposals in 2019. Additional information pertaining to the 2019 BMW Series 5 for the year ended December 31, 2019 is: 1. Business usage: 100% 2. Total miles: 5,280 3. The company has written evidence to support the mileage and business usage. The company has a written policy that prohibits personal use of the automobile by employees or members. 5. The company does not own or leases any other automobiles Guaranteed Payments and Member Distributions All guaranteed payments were paid to Susan James in exchange for international marketing consulting services she provided to SBC. In addition, Susan James and Roberto Rodriguez each withdrew $8,000 per month as distributions (draws) of operating profits Gain/ (Loss) from Sale of Assets Gains and Losses from asset sales are as follows: 1. 200 shares of Midwest States Communications Corporation common stock. a. Acquired - October 5, 2018. b. Sold - March 31, 2019. C. Cost - $11,900. d. Sales Price - $11,000. 2. 1,000 shares of Box Communications, Inc. common stock. a. Acquired - May 10, 2011, b. Sold - July 15, 2019. C. Cost - $30,500. d. Sales Price - $44,700. Operating Line-of-Credit The operating line-of-credit was guaranteed by all the LLC members (recourse). All other liabilities were not guaranteed by the LLC members (nonrecourse). Assume the LLC members share equally in all liabilities; the same as their profit, loss and capital interests. SBC made a significant draw on the operating line-of-credit in August 2019 to finance the acquisition of office equipment and general operating expenses. Deferred Revenue Beginning in 2018, SBC started an international marketing consulting service. It offers the marketing services to foreign owned small businesses operating in the Las Vegas. Under the contract terms, SBC receives payment for the services up-front. It then is obligated to provide the services over the period of the contract. SBC entered into the following international marketing consulting contracts in 2018 and 2019: 1. Customer: Brazilian Tours, LLC 2. Contract date: July 1, 2018 3. Contract duration: 3 years 4. Prepaid revenue: $60,000 1. Customer: Europa Tours, S.A. 2. Contract date: October 1, 2019 3. Contract duration: 2 years 4. Prepaid revenue: $40,000 For financial statement purposes, SBC recognizes the revenue from these service contracts on a monthly basis over the life of the contracts. For tax purposes, SBC elected to follow the one- year deferral method in IRC Sec. 451(c)(1)(Codification of Revenue Procedure 2004-34 under the Tax Cuts and Jobs Act). Miscellaneous None of the members sold any portion of their interests in SBC in 2019. There were no distributions of noncash property or interest in the LLC. None of the members contributed cash or other property to the LLC during the year. The LLC never has participated in a like-kind exchange. SBC's operations are restricted to Southern Nevada. All members are U.S. citizens who are unrelated to one another. The LLC does not own more than 20% (directly or indirectly) of any other entity. No SBC debt was cancelled, forgiven, or modified during the tax year. SBC had no foreign operations, and no legal interest in any foreign trusts or bank accounts. SBC is not publicly traded. The IRS's business code for the For SBC is 541910. The LLC's principal product or service is "Marketing Research and its principal business activity is "Consulting." Susan James (SS# 288- 54-9876) is the Designated Partner Representative. Roberto Rodriguez' SS# is 299-55-6789. Susan's home address is 525 Vista Mountain Lane, Henderson, Nevada 89014. Roberto's home address is 485 Lucky Vista, Las Vegas, NV 89224. SBC files its tax return in Ogden, Utah. Assignment 1. Prepare the following tax return forms, schedules and supporting schedules and attachments where requested for SBC for the year ended December 31, 2019: a. Book-to-Tax Reconciliation (Excel worksheet posted on Canvas; copy attached)) b. Form 1065, pages 1-5. C. Schedule D. d. Form 4562. e. Schedule K-1 for Susan James. 2. Do not prepare a Schedule K-1 for Roberto Rodriguez. 3. Do not efile the return. Assume the return has already been extended. Form 7004 has been prepared and filed extending the due date. You do not need to prepare it. Susan James and Roberto Rodriguez are equal members in SmallBiz Consultants, LLC ("SBC"), a limited liability company. Both members are active in the management of the business. SBC provides marketing services to small businesses in Las Vegas, Nevada. Its federal employer identification number is 40-9871955. SBC uses the accrual method of accounting for both financial accounting and tax reporting purposes. It began its trade or business on July 2, 2007 Its business address is 7998 West Central Avenue, Las Vegas, Nevada 89111. The beginning and ending balance sheets for SBC for the 2019 calendar year are as follows: Beginning Ending Cash Accounts Receivables Investments Furniture & Equipment Accumulated Depreciation Prepaid Expenses - Current Total Assets $68,659 153,825 167,951 248,445 (131,260) 12.123 $519,743 $101,200 178,654 124,951 450,645 (179,790) 18.665 $694,325 Accounts Payables Deferred Revenue Operating Line-of-Credit (Long-Term) Capital - Susan James Capital - Roberto Rodriguez Total Liabilities & Capital $59,243 50,000 60,000 175,250 175,250 $519,743 $66,479 65,000 145,600 208,623 208.623 $694,325 The following information is from SBC's income statement for the year ended December 31, 2019: $785,300 2,410 Sales Revenue Interest Income on bank deposits Interest Income from Nevada State Construction Bonds Gain/ (loss) from Sales of Assets Total Revenue 3,350 13.300 $804,360 Employee Wages Payroll Taxes Guaranteed Payments Repairs & Maintenance Depreciation Meals - Before 50% Disallowance Entertainment Travel Legal & Accounting (Professional Fees) Interest Expense Commissions Contribution to United Way (Cash) Rent Expense (Building) Employee Benefits (Excluding Members) Insurance (Property & Casualty) Supplies Miscellaneous - parking tickets, tax penalties Total Expenses $178,200 39,850 26,400 4,440 48,530 19,650 12,750 24,440 36,000 5,010 22,000 20,000 72,083 28,875 4,360 2,400 626 $545,614 Net Income $258,746* *Net income is before monthly distributions to members as discussed below in Guaranteed Payments and Member Distributions. Capital Additions and Depreciation During 2019, SBC acquired and placed-in-service the following capital assets on the dates provided: Computers and peripheral equipment - March 15, 2019 (new) 2019 BMW Series 5 - June 2, 2019 (new) Office Furniture - June 30, 2019 (used) Office Equipment - August 25, 2019 (new) $19,700 $62,000 $8,000 $112,500 For income tax purposes, SBC's policy is to maximize its tax depreciation. Thus, it will claim MACRS, Bonus and Sec. 179 depreciation when available. Consequently, SBC has claimed either bonus or Sec. 179 depreciation on all its assets placed-in- service prior to January 1, 2019. Thus, these assets are fully depreciated for income tax purposes as of December 31, 2018. There is no Alternative Minimum Tax depreciation preference item for 2019. There were no Sec. 1231 asset sales or disposals in 2019. Additional information pertaining to the 2019 BMW Series 5 for the year ended December 31, 2019 is: 1. Business usage: 100% 2. Total miles: 5,280 3. The company has written evidence to support the mileage and business usage. The company has a written policy that prohibits personal use of the automobile by employees or members. 5. The company does not own or leases any other automobiles Guaranteed Payments and Member Distributions All guaranteed payments were paid to Susan James in exchange for international marketing consulting services she provided to SBC. In addition, Susan James and Roberto Rodriguez each withdrew $8,000 per month as distributions (draws) of operating profits Gain/ (Loss) from Sale of Assets Gains and Losses from asset sales are as follows: 1. 200 shares of Midwest States Communications Corporation common stock. a. Acquired - October 5, 2018. b. Sold - March 31, 2019. C. Cost - $11,900. d. Sales Price - $11,000. 2. 1,000 shares of Box Communications, Inc. common stock. a. Acquired - May 10, 2011, b. Sold - July 15, 2019. C. Cost - $30,500. d. Sales Price - $44,700. Operating Line-of-Credit The operating line-of-credit was guaranteed by all the LLC members (recourse). All other liabilities were not guaranteed by the LLC members (nonrecourse). Assume the LLC members share equally in all liabilities; the same as their profit, loss and capital interests. SBC made a significant draw on the operating line-of-credit in August 2019 to finance the acquisition of office equipment and general operating expenses. Deferred Revenue Beginning in 2018, SBC started an international marketing consulting service. It offers the marketing services to foreign owned small businesses operating in the Las Vegas. Under the contract terms, SBC receives payment for the services up-front. It then is obligated to provide the services over the period of the contract. SBC entered into the following international marketing consulting contracts in 2018 and 2019: 1. Customer: Brazilian Tours, LLC 2. Contract date: July 1, 2018 3. Contract duration: 3 years 4. Prepaid revenue: $60,000 1. Customer: Europa Tours, S.A. 2. Contract date: October 1, 2019 3. Contract duration: 2 years 4. Prepaid revenue: $40,000 For financial statement purposes, SBC recognizes the revenue from these service contracts on a monthly basis over the life of the contracts. For tax purposes, SBC elected to follow the one- year deferral method in IRC Sec. 451(c)(1)(Codification of Revenue Procedure 2004-34 under the Tax Cuts and Jobs Act). Miscellaneous None of the members sold any portion of their interests in SBC in 2019. There were no distributions of noncash property or interest in the LLC. None of the members contributed cash or other property to the LLC during the year. The LLC never has participated in a like-kind exchange. SBC's operations are restricted to Southern Nevada. All members are U.S. citizens who are unrelated to one another. The LLC does not own more than 20% (directly or indirectly) of any other entity. No SBC debt was cancelled, forgiven, or modified during the tax year. SBC had no foreign operations, and no legal interest in any foreign trusts or bank accounts. SBC is not publicly traded. The IRS's business code for the For SBC is 541910. The LLC's principal product or service is "Marketing Research and its principal business activity is "Consulting." Susan James (SS# 288- 54-9876) is the Designated Partner Representative. Roberto Rodriguez' SS# is 299-55-6789. Susan's home address is 525 Vista Mountain Lane, Henderson, Nevada 89014. Roberto's home address is 485 Lucky Vista, Las Vegas, NV 89224. SBC files its tax return in Ogden, Utah. Assignment 1. Prepare the following tax return forms, schedules and supporting schedules and attachments where requested for SBC for the year ended December 31, 2019: a. Book-to-Tax Reconciliation (Excel worksheet posted on Canvas; copy attached)) b. Form 1065, pages 1-5. C. Schedule D. d. Form 4562. e. Schedule K-1 for Susan James. 2. Do not prepare a Schedule K-1 for Roberto Rodriguez. 3. Do not efile the return. Assume the return has already been extended. Form 7004 has been prepared and filed extending the due date. You do not need to prepare it