Required

how to prepare a partnership tax return. See data below. You will need the following forms:

Form 1065 and corresponding schedules

Schedule K-1 for Dr. Bailey (from problem C9-58)

For the Schedule K-1. The filing center is Ogden, Utah.

Individual taxpayer information

Individual tax forms required:

Form 1040

Schedule A

Schedule B

Schedule D

Schedule E

Form 8949

Form 4797 (see item 4.i. below)

1.Dr. Leisa Bailey's social security number is 456-12-3789. She is married but does not have any dependents. Her husband's name is Daniel Bailey and his social security number is 123-45-6789.

2.Additional information to complete the tax returns:

a.Daniel works at Intel Corporation and earned $160,000 during 2017.

b.His federal tax withholding was $30,000 and his Arizona income taxes withheld were $8,000. Leisa made federal estimated tax payments of $40,000 and Arizona estimated payments of $9,500

c.Mortgage interest on their personal residence was $15,200 and property taxes were $5,150.

Additional charitable contributions of $2,750 were paid during the year.

d.On July 10, 2017 they sold 100 shares of Intel Corporation stock for $70 per share. They purchased the stock on May 1, 2012 for $56 per share.

e.The Taxpayer's have a long-term capital loss carry forward of $5,000.

f.Assume AMT does not apply.

g.Apply any refund to estimated tax payments for the next year.

h.Instead of preparing Form 4797, input any gain/loss from the Sec. 1231 asset on line 14 of form 1040.

Healthwise Medical Supplies Company is located at 2400 Second Street, City, ST 12345.

The company is a general partnership that uses the calendar year and accrual basis for

both book and tax purposes. It engages in the development and sale of specialized surgical

tools to hospitals. The employer identification number (EIN) is XX-2018016. The company

formed and began business on January 1, 2015. It has no foreign partners or other

foreign dealings. The company is neither a tax shelter nor a publicly traded partnership.

The company has made no distributions other than cash, and no changes in ownership

have occurred during the current year. Dr. Bailey is the Tax Matters Partner. The partnership

makes no special elections. Table C:9-3 contains book balance sheet information at

the beginning and end of the current year, and Table C:9-4 presents a book income statement

for the current year. Other information follows:

Information on Partnership Formation:

Two individuals formed the partnership on January 1, 2015: Dr. Leisa H. Bailey (1200

First Pike, City, ST 12345) and Dr. Thomas J. Firth (3600 Third Blvd., City, ST 54321).

For a 30% interest, Dr. Bailey contributed $600,000 cash. She is an active general partner

who manages the company. For a 70% interest, Dr. Firth contributed $1.16 million cash

and 1,000 shares of Fastgrowth, Inc. stock having, at the time of contribution, a $240,000

fair market value (FMV) and a $48,000 adjusted basis. Dr. Firth is an active general partner

who designs and develops new products. For book purposes, the company recorded the

contribution of stock at fair market value.

Inventory and Cost of Goods Sold (Form 1125-A):

The company uses the periodic inventory method and prices its inventory using the lower

of FIFO cost or market. Only beginning inventory, ending inventory, and purchases should

be reflected in Schedule A. No other costs or expenses are allocated to cost of goods sold.

Note: the company is exempt from the uniform capitalization (UNICAP) rules because

average gross income for the previous year was less than $10 million [Sec. 263A(b)(2)(B)].

Line 9 (a) Check (ii)

(b)-(d) Not applicable

(e) & (f) No

Capital Gains and Losses (Schedule D):

The company sold all 1,000 shares of the Fastgrowth, Inc. common stock on July 2, 2016,

for $720,000. Dr. Firth acquired the stock on January 2, 2013, for $48,000 and contributed

the stock to the company on January 1, 2015, when its FMV was $240,000.

. TABLE C:9-3

Healthwise Medical Supplies CompanyBook Balance Sheet Information

_ January 1, 2016 December 31, 2016

AccountDebit CreditDebitCredit

Cash $ 233,500 $ 143,450

Accounts receivable 540,000 600,000

Inventory 1,000,000 1,200,000

Investment in municipal bonds 40,000 40,000

Investment in corporate stock 240,000-0-

Equipment 1,000,0001,400,000

Accumulated depreciation

Equipment$ 142,900$ 787,800

Accounts payable100,000130,000

Notes payable (short-term)750,000150,000

Accrued payroll expenses3,5005,250

Capital account balances: _ _ _ _

Dr. Leisa H. Bailey (30%)617,130 693,120

Dr. Thomas J. Firth (70%) 1,439,970 1,617,280

Totals $3,053,500 $3,053,500 $3,383,450 $3,383,450

Fixed Assets and Depreciation (Form 4562):

The company acquired the equipment on January 2, 2015, and placed it in service on that

date. The equipment, which originally cost $1 million, is MACRS seven-year property.

The company did not elect Sec. 179 expensing in the acquisition year and elected out of

bonus depreciation. The company claimed the following depreciation on this property:

Year

Book and Regular

Tax DepreciationAMT Depreciation

2015$142,900$107,100

2016 244,900 191,300

On March 1, 2016, the company acquired and placed in service additional equipment

costing $400,000. The company made the Sec. 179 expensing election for the entire cost

of this new equipment. No depreciation or expensing is reported on Schedule A.