PROBLEM 5PARTNERSHIP (FORM 1065)

1. Ryan Ross (111-11-1112), Oscar Omega (222-22-2222), Clark Carey (333-33-3333), and Kim Kardigan (444-44-4444) are equal active members in ROCK the Ages LLC. ROCK serves as agent and manager for prominent musicians in the Los Angeles area. The LLCs Federal ID number is 55-5555555. It uses the cash basis and the calendar year and began operations on January 1, 2005. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as Rhiannon, Burgundy Six, Elena Gomez, Tyler Quick, Queen Bey, and Bruno Mercury and has had a very profitable year. The following information was taken from the LLCs income statement for the current year.

Revenues

Fees and commissions	$4,800,000
Taxable interest income from bank deposits	1,600
Tax-exempt interest	3,200
Net gain on stock sales	4,000
Total revenues Expenses	$4,808,800
Advertising and public relations	$ 380,000
Charitable contributions	28,000
Section 179 expense	20,000
Employee W2 wages	1,000,000
Guaranteed payment (services), Ryan Ross, office manager	800,000
Guaranteed payment (services), other members	600,000
Business meals subject to 50% disallowance	200,000
Travel	320,000
Legal and accounting fees	132,000
Office rentals paid	80,000
Interest expense on operating line of credit	10,000
Insurance premiums	52,000
Office expense	200,000
Payroll taxes	92,000
Utilities	54,800
Total expenses	$3,968,800

14. APPENDIX E Practice Set AssignmentsComprehensive Tax Return Problems

During the past couple of years, ROCK has taken advantage of bonus depreciation and 179 deductions and fully remodeled the premises and upgraded its lease- hold improvements. This year, ROCK wrapped up its remodel with the purchase of $20,000 of office furniture for which it will claim a 179 deduction. (For simplicity, assume that ROCK uses the same cost recovery methods for both tax and financial purposes.) There is no depreciation adjustment for alternative minimum tax purposes. While the property is fully depreciated, it is not beyond the end of its depreciable life for purposes of the qualified business income deduction.

ROCK invests much of its excess cash in non-dividend-paying growth stocks and tax-exempt securities. During the year, the LLC sold two securities. On June 15, ROCK purchased 1,000 shares of Tech, Inc. stock for $100,000; it sold those shares on December 15, for $80,000. On March 15 of last year, ROCK purchased 2,000 shares of BioLabs, Inc. stock for $136,000; it sold those shares for $160,000 on December 15 of the current year. These transactions were reported to the IRS on Forms 1099B; ROCKs basis in these shares was reported.

Net income per books is $840,000. On January 1, the members capital accounts equaled $200,000 each. No additional capital contributions were made this year. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year. The LLCs balance sheet as of December 31 of this year is as follows.

	Beginning	Ending
Cash	$ 444,000	$ ??
Tax-exempt securities	120,000	120,000
Marketable securities	436,000	300,000
Leasehold improvements, furniture, and equipment	960,000	980,000
Accumulated depreciation	(960,000)	(980,000)
Total assets	$1,000,000	$ ??
Operating line of credit	$ 200,000	$ 160,000
Capital, Ross	200,000	??
Capital, Omega	200,000	??
Capital, Carey	200,000	??
Capital, Kardigan	200,000	??
Total liabilities and capital	$1,000,000	$ ??

All debt is shared equally by the members. Each member has personally guaranteed the debt of the LLC. All members are active in LLC operations. The appropriate business code for the entity is 711410. For the Form 1065, page 5, Analysis of Net Income, put all amounts in cell 2(b)(ii). The LLCs Form 1065 was prepared by Ryan Ross and sent to the Ogden, UT IRS Service Center.

Please use 2018, 1065 form and 1065 K-1 tax forms to answer this question.