Problem 14-16 (Algorithmic) (LO.4,5,7) 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 $524,000, and the LLC has debts of $340,600 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 $786,000 W-2 wages 200,000 Depreciation expense 300,000 7,860 Interest income Long-term capital loss 5,240 15,720 7,910 39,300 Long-term capital gain Charitable contribution (cash) Cash distribution to Amy Unadjusted basis of partnership depreciable property immediately after acquisition 1,600,000 Toloss onerating eynenses other than expenses listed separately above). * Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $238,420. Assume that all transactions are reflected in Amy's beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction 4. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point LLC interest at the beginning of the year: X LLC interest at the end of the year: X Feedback b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income X Net long-term capital gain Interest income Charitable contribution deduction X Cash distribution 0 C. Based on the information provided, what other calculations is Amy required to make? Amy may be eligible to deduct up to X % of the ordinary income as qualified business income under 5 199A, and will make that calculation on her return. This deduction does not require a cash outflow by Amy or the LLC, and it does not X affect her basis or capital account. As someone treated as a general partner, Amy's distributive share of the LLC's ordinary business income is subject to self-employment tax and possibly the additional Medicare tax. Her net investment income x from the LLC may be subject to the additional tax under 5 1411. Feedback d. Prepare Amy's tax basis capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending tax basis in the LLC interest as calculated in part (a)? Capital account balance, beginning year Ordinary income Interest income Net long-term capital gain X Less: Less: Charitable contribution Cash distribution to Amy 0 X Capital account balance, end of year Amy's capital account differs from her basis only by the amount of her share of LLC assets X Problem 14-16 (Algorithmic) (LO.4,5,7) 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 $524,000, and the LLC has debts of $340,600 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 $786,000 W-2 wages 200,000 Depreciation expense 300,000 7,860 Interest income Long-term capital loss 5,240 15,720 7,910 39,300 Long-term capital gain Charitable contribution (cash) Cash distribution to Amy Unadjusted basis of partnership depreciable property immediately after acquisition 1,600,000 Toloss onerating eynenses other than expenses listed separately above). * Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $238,420. Assume that all transactions are reflected in Amy's beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction 4. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point LLC interest at the beginning of the year: X LLC interest at the end of the year: X Feedback b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income X Net long-term capital gain Interest income Charitable contribution deduction X Cash distribution 0 C. Based on the information provided, what other calculations is Amy required to make? Amy may be eligible to deduct up to X % of the ordinary income as qualified business income under 5 199A, and will make that calculation on her return. This deduction does not require a cash outflow by Amy or the LLC, and it does not X affect her basis or capital account. As someone treated as a general partner, Amy's distributive share of the LLC's ordinary business income is subject to self-employment tax and possibly the additional Medicare tax. Her net investment income x from the LLC may be subject to the additional tax under 5 1411. Feedback d. Prepare Amy's tax basis capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending tax basis in the LLC interest as calculated in part (a)? Capital account balance, beginning year Ordinary income Interest income Net long-term capital gain X Less: Less: Charitable contribution Cash distribution to Amy 0 X Capital account balance, end of year Amy's capital account differs from her basis only by the amount of her share of LLC assets X