Please refer to the attachment to answer this question. This question was created from f1065 https://www.coursehero.com/file/18034114/f1065/?dqqid=112271Additional Comments:The following information was taken from the partnership?s income statement for the current year:RevenuesSales$1,002,000Cost of goods sold(341,000)Returns and allowances(45,390)Interest income from bank deposits1,600Interest income from tax-exempt bonds1,015Gain/loss on sale of securities1,500Qualified dividend income1,700 Total Revenues621,425ExpensesAdvertising16,700Charitable contributions5,500?Regular? Depreciation18,960Section 179 Depreciation37,000Guaranteed payment, Caroline Wills, office manager58,000Insurance premiums19,490Interest expense (mortgage and operating debt)12,350Meals and entertainment (subject to 50% limit)1,000Office expense46,000Payroll taxes13,800Property tax5,800Salaries and wages150,000Utilities13,150 Total Expenses397,750Net income for books223,675Tillie?s Tools took advantage of Section 179 depreciation this year for $37,000. Tillie?s Tool uses the same cost recovery methods for both tax and financial purposes. There is no depreciation adjustment for alternative minimum tax purposes. Tillie?s Tools sold some tax-exempt securities during the year. The securities were originally purchased on 10/2/2010 for $8,000 and were sold on 12/10/2016 for $9,500. The firm?s 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.Tillie?s Tools? book balance sheet as of December 31, 2016 is as follows:BeginningEndingCash225,000165,402Inventory65,00072,000Tax-exempt securities33,75025,750Building and equipment1,225,0001,242,000Accumulated depreciation(753,850)(810,810) Total Assets$794,900$694,342Line of credit for operations$46,000$34,000Mortgage645,620513,387Capital, Nicole25,82036,739Capital, Caroline25,82036,739Capital, Ann25,82036,739Capital, Christine25,82036,738 Total Liabilities and Capital$794,900$694,342The line of credit is recourse debt.The instructions for Line 6a of the Schedule K might be helpful for you: "Line 6a. Ordinary Dividends: Enter only taxable ordinary dividends on line 6a, including any qualified dividends reported on line 6b." (Emphasis added by me.)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 completing the tax return problem by hand you do not need to submit a K-1 for all 4 partners. Please submit 1 for Ann and 1 for Caroline.If you are using the H&R Block software:? Check the box for:o Automatically calculate reconciliation items.o 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 = 615,610