Required information

Skip to question

[The following information applies to the questions displayed below.]

Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $118,000, and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $71,200 and was appraised at $188,000. The land was also encumbered with a $71,200 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $7,800 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information:

Sales revenue	$ 482,000
Cost of goods sold	416,400
Operating expenses	76,400
Long-term capital gains	2,520
1231 gains	900
Charitable contributions	300
Municipal bond interest	300
Salary paid as a guaranteed payment to Deanne (not included in expenses)	3,000

c-2. Using the information generated in answering parts (a) and (b), prepare a Schedule K-1 for Deanne.