Problem 10-37 (Algorithmic) (LO. 6, 7, 8, 9, 10, 11) Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $544,000, and the LLC has debts of $353,600 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $816,000 W-2 wages 200,000 Depreciation expense 300,000 Interest income 8,160 Long-term capital loss 5,440 Long-term capital gain 16,320 Charitable contribution (cash) 8,210 Cash distribution to Amy 40,800 Unadjusted basis of partnership depreciable property immediately after acquisition 1,600,000 e. Using the information from parts (a) to (d), prepare Amy's Schedule K-1 as if you were the preparer of AM Products LLC's tax return. Provide all information that Amy needs to the extent you can. Enter all amounts as positive numbers. 651119 o Final K-1 O Amended K-1 OMB No. 1545-0123 Schedule K-1 Part III Partner's Share of Current Year Income, 2019 (Form 1065) Deductions, Credits, and Other Items 15 Credits Department of the Treasury Internal Revenue Service For calendar year 2019, or tax year 1 Ordinary business income (loss) beginning / / 2019 ending / / 2 Net rental real estate income (loss) Partner's Share of Income, Deductions, Credits, etc. See separate instructions. 3 Other net rental income (loss) 16 Foreign transactions Part I Information About the Partnership A Partnership's employer identification number 4a Guaranteed payments for services B Partnership's name, address, city, state, and ZIP code AM Products, LLC 4b Guaranteed payments for capital IRS Center where partnership filed return 4c Total guaranteed payments D Check if this is a publicly traded partnership (PTP) 5 Interest income Part II Information About the Partner E Partner's SSN or TIN (Do not use TIN of a disregarded entity. See 6a Ordinary dividends inst.) 6b Qualified dividends F Name, address, city, state, and ZIP code for partner entered in E. See instructions. Amy 6c Dividend equivalents 17 Alternative minimum tax (AMT) items 7 Royalties 8 G General partner or LLC member- Limited partner or other LLC manager member H1 Domestic partner Foreign partner H2 If the partner is a disregarded entity (DE), enter the partner's: TIN Name Net short-term capital gain (loss) 9a Net long-term capital gain (loss) 18 Tax-exempt income and nondeductible expenses 11 What type of entity is this partner? 9b Collectibles (28%) gain (loss) A 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here a 9c Unrecaptured section 1250 gain 10 Net section 1231 gain (loss) 10 Net section 1231 gain (loss) J Partner's share of profit, loss, and capital (see instructions): Beginning Ending 11 Other income (loss) 19 Distributions Profit % A % Loss % % Capital % % 12 Section 179 deduction 20 Other information A Check if decrease is due to sale or exchange of partnership interest o 13 Other deductions Z* STMT QBI K Partner's share of liabilities: Beginning Ending W-2 wages Nonrecourse $ UBIA Qualified nonrecourse financing $ $ Recourse Check this box if Item K includes liability amounts from lower tier partnerships. 14 Self-employment earnings (loss) A L Partner's capital account analysis: A Partner's capital account analysis: Beginning capital account ..... Capital contributed during the year. . 21 o More than one activity for at-risk purposes* 22 o More than one activity for passive activity purposes* Current year net income (loss).. $ *See attached statement for additional information. Other increase (decrease) (attach explanation) Withdrawals & distributions ) DO Ending capital account - M Did the partner contribute property with a built-in gain or loss? Yes No If "Yes," attach statement. See instructions. muc N Partner's Share of Net Unrecognized Section 704(c) Gain or (Loss) OZJ Beginning capital account Ending $ For Paperwork Reduction Act Notice, see Instructions for Form 1065. www.irs.gov/Form1065 Cat. No. 11394R Schedule K-1 (Form 1065) 2019 Problem 10-37 (Algorithmic) (LO. 6, 7, 8, 9, 10, 11) Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $544,000, and the LLC has debts of $353,600 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $816,000 W-2 wages 200,000 Depreciation expense 300,000 Interest income 8,160 Long-term capital loss 5,440 Long-term capital gain 16,320 Charitable contribution (cash) 8,210 Cash distribution to Amy 40,800 Unadjusted basis of partnership depreciable property immediately after acquisition 1,600,000 e. Using the information from parts (a) to (d), prepare Amy's Schedule K-1 as if you were the preparer of AM Products LLC's tax return. Provide all information that Amy needs to the extent you can. Enter all amounts as positive numbers. 651119 o Final K-1 O Amended K-1 OMB No. 1545-0123 Schedule K-1 Part III Partner's Share of Current Year Income, 2019 (Form 1065) Deductions, Credits, and Other Items 15 Credits Department of the Treasury Internal Revenue Service For calendar year 2019, or tax year 1 Ordinary business income (loss) beginning / / 2019 ending / / 2 Net rental real estate income (loss) Partner's Share of Income, Deductions, Credits, etc. See separate instructions. 3 Other net rental income (loss) 16 Foreign transactions Part I Information About the Partnership A Partnership's employer identification number 4a Guaranteed payments for services B Partnership's name, address, city, state, and ZIP code AM Products, LLC 4b Guaranteed payments for capital IRS Center where partnership filed return 4c Total guaranteed payments D Check if this is a publicly traded partnership (PTP) 5 Interest income Part II Information About the Partner E Partner's SSN or TIN (Do not use TIN of a disregarded entity. See 6a Ordinary dividends inst.) 6b Qualified dividends F Name, address, city, state, and ZIP code for partner entered in E. See instructions. Amy 6c Dividend equivalents 17 Alternative minimum tax (AMT) items 7 Royalties 8 G General partner or LLC member- Limited partner or other LLC manager member H1 Domestic partner Foreign partner H2 If the partner is a disregarded entity (DE), enter the partner's: TIN Name Net short-term capital gain (loss) 9a Net long-term capital gain (loss) 18 Tax-exempt income and nondeductible expenses 11 What type of entity is this partner? 9b Collectibles (28%) gain (loss) A 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here a 9c Unrecaptured section 1250 gain 10 Net section 1231 gain (loss) 10 Net section 1231 gain (loss) J Partner's share of profit, loss, and capital (see instructions): Beginning Ending 11 Other income (loss) 19 Distributions Profit % A % Loss % % Capital % % 12 Section 179 deduction 20 Other information A Check if decrease is due to sale or exchange of partnership interest o 13 Other deductions Z* STMT QBI K Partner's share of liabilities: Beginning Ending W-2 wages Nonrecourse $ UBIA Qualified nonrecourse financing $ $ Recourse Check this box if Item K includes liability amounts from lower tier partnerships. 14 Self-employment earnings (loss) A L Partner's capital account analysis: A Partner's capital account analysis: Beginning capital account ..... Capital contributed during the year. . 21 o More than one activity for at-risk purposes* 22 o More than one activity for passive activity purposes* Current year net income (loss).. $ *See attached statement for additional information. Other increase (decrease) (attach explanation) Withdrawals & distributions ) DO Ending capital account - M Did the partner contribute property with a built-in gain or loss? Yes No If "Yes," attach statement. See instructions. muc N Partner's Share of Net Unrecognized Section 704(c) Gain or (Loss) OZJ Beginning capital account Ending $ For Paperwork Reduction Act Notice, see Instructions for Form 1065. www.irs.gov/Form1065 Cat. No. 11394R Schedule K-1 (Form 1065) 2019