Required information [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 $121,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $59,000 and was appraised at $180,000. The land was also encumbered with a $59,000 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 $7,200 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information: Sales revenue Cost of goods sold Operating expenses Long-term capital gains $ 490,000 460,000 70,000 2,400 1231 gains Charitable contributions Municipal bond interest Salary paid as a guaranteed payment to Deanne (not included in expenses) 600 300 300 3,000 c. Using the information generated in answering parts (a) and (b), prepare Blue Bell's page 1 and Schedule K to be included with its Form 1065 for its first year of operations, along with Schedule K-1 for Deanne. (Use 2021 tax rules regardless of year on tax form. Percentages should be rounded to two decimal places. Losses should be entered as negative numbers and input all other values as positive numbers.) Prepare Form 1065. 1065 PG 1 Schedule K Schedule K1 * Answer is not complete. Form 1065 Page 1. Form 1065 Department of the Treasury Internal Revenue Service A Principal business activity B Principal product or service C Business code number U.S. Return of Partnership Income 2020, ending For calendar year 2020, or tax year beginning 20 Go to www.irs.gov/Form 1065 for instructions and the latest information. Name of partnership Type or Print Blue Bell Number, street, and room or suite no. If a P.O. box, see instructions. City or town, state or province, country, and ZIP or foreign postal code OMB No. 1545-0123 2020 D Employer identification number E Date business started F Total assets (see instructions) G Check applicable boxes: H Check accounting method: (1) Initial Return (1) Cash (2) Final Return (3) Name Change (4) Address Change (2) Accrual (3) Other (specify) Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year. J Check if Schedules C and M-3 are attached K Check if partnership: (5) Amended Return 3 (1) Aggregated activities for section 465 at-risk purposes (2) Grouped activities for section 469 passive activity purposes Caution: Include only trade or business income and expenses on lines 1a through 22 below. See instructions for more information. 1a Gross receipts or sales b Returns and allowances c Balance. Subtract line 1b from line 1a 1a 1b 490,000 1c 490,000 2 Cost of goods sold (attach Form 1125-A) 2 460,000 3 Gross profit. Subtract line 2 from line 1c 3 30,000 Income 4 Ordinary income (loss) from other partnerships, estates, and trusts (attach statement) 4 15 Interest (see instructions) 16a Depreciation (if required, attach Form 4562) Deductions (see instructions 5 Net farm profit (loss) (attach Schedule F (Form 1040)) 6 Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) 7 Other income (loss) (attach statement) 8 Total income (loss). Combine lines 3 through 7 9 Salaries and wages (other than to partners) (less employment credits) 10 Guaranteed payments to partners 11 Repairs and maintenance 12 Bad debts 13 Rent 14 Taxes and licenses 5 6 7 8 30,000 9 10 3,000 11 12 13 14 15 16a for b Less depreciation reported on Form 1125-A and elsewhere on return 16b 16c limitations) 17 Depletion (Do not deduct oil and gas depletion.) 17 18 Retirement plans, etc. 19 Employee benefit programs 18 19 20 Other deductions (attach statement) 20 70,000 21 Total deductions. Add the amounts shown in the far right column for lines 9 through 20 22 Ordinary business income (loss). Subtract line 21 from line 8 21 73,000 22 (43,000) 23 Interest due under the look-back method-completed long-term contracts (attach Form 8697) 24 Interest due under the look-back method-income forecast method (attach Form 8866) 23 24 Tax and Payment 25 BBA AAR imputed underpayment (see instructions) 26 Other taxes (see instructions) 27 Total balance due. Add lines 23 through 26 28 Payment (see instructions) 29 Amount owed. If line 28 is smaller than line 27, enter amount owed 30 Overpayment. If line 28 is larger than line 27, enter overpayment 25 26 27 28 29 30 Print/Type preparer's name Preparer's signature Date Check if self- employed Paid Preparer Use Only Firm's name Firm's address Cat. No. 11390Z Firm's EIN Phone no. For Paperwork Reduction Act Notice, see separate instructions. THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education. PTIN Form 1065 (2020) Form 1065 Schedule K. Form 1065 (2020) Schedule K Partners' Distributive Share Items 1 Ordinary business income (loss) (page 1, line 22) Page 4 Total amount 1 43,000 2 3c 4 4a 4b 3,000 2 Net rental real estate income (loss) (attach Form 8825) 3a Other gross rental income (loss) b Expenses from other rental activities (attach statement) 3b c Other net rental income (loss). Subtract line 3b from line 3a 4 Guaranteed payments: a Services b Capital c Total. Add lines 4a and 4b Income (Loss) 5 Interest income 6 Dividends and dividend equivalents: 7 Royalties a Ordinary dividends b Qualified dividends c Dividend equivalents 8 Net short-term capital gain (loss) (attach Schedule D (Form 1065)) 9a Net long-term capital gain (loss) (attach Schedule D (Form 1065)) b Collectibles (28%) gain (loss) c Unrecaptured section 1250 gain (attach statement) 10 Net section 1231 gain (loss) (attach Form 4797) 11 Other income (loss) (see instructions) Type 6b 69 4c 3,000 5 6c 7 8 9a 2,400 9b 9c 10 600 11 Deductions 12 Section 179 deduction (attach Form 4562) 13a Contributions b Investment interest expense Section 59(e)(2) expenditures: (1) Type d Other deductions (see instructions) Type 14a Net earnings (loss) from self-employment 12 13a 300 13b (2) Amount (2) Amount 13c(2) 13d 14a 40,000 Self- b Employment Gross farming or fishing income 14b Gross nonfarm income 14c 15a Low-income housing credit (section 42(j)(5)) 15a b Low-income housing credit (other) 15b Credits c d Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable) Other rental real estate credits 15c Type 15d (see instructions) e Other rental credits (see instructions) f Other credits (see instructions) 16a Name of country or U.S. possession Type Type 15e 15f Foreign Transactions b Gross income from all sources c Gross income sourced at partner level Foreign gross income sourced at partnership level 16b 16c d Reserved 0 for future use f Passive category i Interest 0 e Foreign branch category 0 g General category h Other (attach statement). 16f Deductions allocated and apportioned at partner level expense j Other Deductions allocated and apportioned at partnership level to foreign source income 16h | k Reserved 0 Foreign branch category 0 for future use m Passive 0 category n General category Total foreign taxes (check one): Paid 0 Accrued o Other (attach statement) 161 q Reduction in taxes available for credit (attach statement) 16m r Other foreign tax information (attach statement) 17a 17b 17c 17d 17e 17f 18a 300 18b 18c 19a Alternative 17a Post-1986 depreciation adjustment b Adjusted gain or loss Minimum Tax Depletion (other than oil and gas) (AMT) Items d Oil, gas, and geothermal properties-gross income e Oil, gas, and geothermal properties-deductions f Other AMT items (attach statement) b Other tax-exempt income 18a Tax-exempt interest income Nondeductible expenses 19a Distributions of cash and marketable securities Other Information b Distributions of other property 19b 20a Investment income b Investment expenses Other items and amounts (attach statement) 20a 20b Form 1065 Schedule K1. Schedule K-1 (Form 1065) Department of the Treasury 2020 Final K-1 Part III Amended K-1 OMB No. 1545-0123 Partner's Share of Current Year Income, Deductions, Credits, and Other Items For calendar year 2020, or tax year 1 Ordinary business income (loss) 15 Credits Internal Revenue Service beginning 2020 (14,333) Net rental real estate ending ,20 2 income (loss) Partner's Share of Income, Deductions, Credits, etc. See back of form and separate instructions. Other net rental income 3 16 (loss) Foreign transactions Part I Information About the Partnership 4a Guaranteed payments for services Partnership's employer identification number 3,000 Guaranteed payments for 4b capital B Partnership's name, address, city, state, and ZIP code Blue Bell 4c Total guaranteed payments C IRS Center where partnership filed return 5 Interest income 6a Ordinary dividends D Check if this is a publicly traded partnership (PTP) 6b Qualified dividends Alternative minimum tax Part II Information About the Partner 6c Dividend equivalents 17 (AMT) items 7 Royalties E Partner's SSN or TIN (Do not use TIN of a disregarded entity. See instructions) 0 8 Net short-term capital gain (loss) F Name, address, city, state, and ZIP code for partner entered in E. See instructions Deanne 9a Net long-term capital gain (loss) 18 Tax-exempt income and nondeductible expenses 800 G General partner or LL member-manager Limited partner or other LLC Collectibles (28%) gain 9b (loss) A 100 member 0 H1 Domestic partner Foreign partner Unrecaptured section 9c 1250 gain H2 If the partner is a disregarded entity (DE), enter the partner's: Name 10 Net section 1231 gain (loss) 200 11 What type of entity is this partner? Individual 11 Other income (loss) 19 Distributions 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here J Partner's share of profit, loss, and capital (see instructions): Beginning Ending 12 Section 179 deduction Profit Loss 33.33 % 33.33 % 33.33 % 33.33 % 13 Other deductions Capital 33.33 % 33.33 % A 100 Check if decrease is due to sale or exchange of partnership interest K Partner's share of liabilities: Beginning Ending Nonrecourse Qualified nonrecourse financing Recourse $ $ 14 Self-employment earnings (loss) $ (11,333) Check this box if Item K includes liability amounts from lower tier partnerships. Partner's Capital Account Analysis Beginning capital account Capital contributed during the year Current year net income (loss) Other increase (decrease) (attach explanation) Withdrawals & distributions Ending capital account Did the partner contribute property with a built-in gain or loss? M Yes N No S 0 S 121,000 20 More than one activity for at-risk purposes* If "Yes," attach statement (see instructions) Partner's Share of Net Unrecognized Section 704(c) Gain or (Loss) Beginning Ending For Paperwork Reduction Act Notice, see Instructions for Form 1065. 21 More than one activity for passive activity purposes* 121,000 *See attached statement for additional information. For IRS Use Only www.irs.gov/Form1065 Cat. No. 11394R Schedule K-1 (Form 1065) 2020 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education