Problem 21-37 (Algorithmic) (LO. 6, 7, 8, 9, 10, 11) Amy and Mitchell share equally (50%) in the profits, losses, and capital of the accrual basis AM Products LLC. 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 tax basis capital account has a balance of $772,000, and the LLC has debts of $501,800 payable to unrelated parties. All debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* W-2 wages $1,158,000 200,000 Depreciation expense 300,000 Interest income 11,580 Long-term capital loss 7,720 Long-term capital gain 23,160 Charitable contribution (cash) 11,630 Cash distribution to Amy 57,900 Unadjusted basis of partnership property 1,600,000 immediately after acquisition * Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $351,260. 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. a. 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: $ LLC interest at the end of the year: 1,022,900 1,164,715 X Feedback Check My Work A partner's basis in the LLC interest is important for determining the treatment of distributions from the LLC to the partner, establishing the deductibility of LLC losses, and calculating gain or loss on the partner's disposition of the LLC interest. After the partner is admitted to the LLC, the partner's basis is adjusted for numerous items. b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income Net long-term capital gain Interest income Charitable contribution deduction Cash distribution Feedback Check My Work Incorrect c. Based on the information provided, what other calculations is Amy required to make? Amy may be eligible to deduct up to % of the ordinary income as qualified business income under 199A and will make require a cash outflow by Amy or the LLC, and it does not that calculation on her return. This deduction does not 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 from the LLC may be subject to the additional tax under 1411. Feedback Check My Work Partially correct d. Prepare Amy's tax basis capital account roll forward 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 Less: Charitable contribution Cash distribution to Amy Capital account balance, end of year Amy's capital account differs from her basis only by the amount of her share of LLC liabilities Feedback Check My Work Partially correct .