Ryan Ross ( 111 11 1112 ), Oscar Omega ( 222 22 2223 ), Clark Carey ( 333 33 3334 ), and Kim Kardigan ( 444 44 4445 ) are equal active members in ROCK the Ages LLC ROCK serves as agent and manager for prominent musicians in the Los Angeles area The LLC's Federal ID number is 55 5555556 It uses the cash basis and the calendar year and began operations on January 1, 2009 Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036 ROCK was the force behind such music icons as Adrianna Venti, Drake Malone, Elena Gomez, Tyler Quick, Queen Bey, and Bruno Mercury and has had a very profitable year The following information was taken from the LLC's 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 $4,808,800 Expenses Advertising and public relations $380,000 Charitable contributions 28,000 179 expense 20,000 Employee salaries and 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 Business restaurant meals and travel (100 deductible) 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 Recently, ROCK has taken advantage of bonus depreciation and 179 deductions and fully remodeled the premises and upgraded its leasehold 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 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, 2021, ROCK purchased 1,000 shares of Tech, Inc , stock for $100,000 it sold those shares on December 15, 2021, for $80,000 On March 15, 2020, ROCK purchased 2,000 shares of BioLabs, Inc , stock for $136,000 it sold those shares for $160,000 on December 15, 2021 These transactions were reported to the IRS on Forms 1099B ROCK's basis in these shares was reported Net income per books is $840,000 On January 1, 2021, the members' tax basis capital accounts equaled $200,000 each No additional capital contributions were made in 2021 In addition to their guaranteed payments, each member withdrew $250,000 cash during the year All contributions and distributions have been in cash, so the LLC has no net unrecognized 704(c) gain or loss The LLC's balance sheet as of December 31, 2021, 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 $ The firm's activities do not constitute qualified production activities for purposes of the 199 deduction (Note that the 179 deduction is a business related expense ) The LLCs UBIA (unadjusted basis immediately after acquisition) equals the total original cost of all leasehold improvements, or $980,000 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 business code for the entity is 711410 Schedule M 2 Analysis of Partners' Capital Accounts 1 Balance at beginning of year 2 Capital contributed a Cash b Property 3 Net income (loss) per books 4 Other increases (itemize) Statement 6 5 Add lines 1 through 4 6 Distributions 800,000 begin tabular l hline hline hline end tabular a Cash b Property 7 Other decreases (itemize) 8 Add lines 6 and 7 9 Balance at end of year Subtract line 8 from Statement 7 Stalernent7 8 Add lines 6 and 7 Balance at end of year Subtract line 8 from Statement 3 Form 1065 , Schedule K, Line 20c Other Reportable Items Business Interest Expense (Informational Only for Basis Limitations) included as a Deduction on the Following Lines(s) Schedule K, line 1 Statement 6 Form 1065, Schedule M 2, Line 4 other Increases Tax Exempt Interest and or Tax Exempt Other Income Total Statement 7 Form 1065, Schedule M 2, Line 7 Other Decreases Guaranteed Payments (other than health insurance) Item L Partner's Capital Account Analysis Other Increase (Decrease) Other Increase Tax Exempt Interest and or Tax Exempt Other Income Other Decrease Guaranteed Payments (other than health insurance) Non Deductible Expenses Schedule M 2 Analysis of Partners' Capital Accounts 1 Balance at beginning of year 2 Capital contributed a Cash b Property 3 Net income (loss) per books 4 Other increases (itemize) Statement 6 5 Add lines 1 through 4 6 Distributions 800,000 begin tabular l hline hline hline end tabular a Cash b Property 7 Other decreases (itemize) 8 Add lines 6 and 7 9 Balance at end of year Subtract line 8 from Statement 7 Stalernent7 8 Add lines 6 and 7 Balance at end of year Subtract line 8 from Statement 3 Form 1065 , Schedule K, Line 20c Other Reportable Items Business Interest Expense (Informational Only for Basis Limitations) included as a Deduction on the Following Lines(s) Schedule K, line 1 Statement 6 Form 1065, Schedule M 2, Line 4 other Increases Tax Exempt Interest and or Tax Exempt Other Income Total Statement 7 Form 1065, Schedule M 2, Line 7 Other Decreases Guaranteed Payments (other than health insurance) Item L Partner's Capital Account Analysis Other Increase (Decrease) Other Increase Tax Exempt Interest and or Tax Exempt Other Income Other Decrease Guaranteed Payments (other than health insurance) Non Deductible Expenses

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Ryan Ross ( 111-11-1112 ), Oscar Omega ( 222-22-2223 ), Clark Carey ( 333-33-3334 ), and Kim Kardigan ( 444-44-4445 ) are equal active members

Ryan Ross (111-11-1112), Oscar Omega (222-22-2223), Clark Carey (333-33-3334), and Kim Kardigan (444-44-4445) are equal active members in ROCK the Ages LLC. ROCK serves as agent and manager for prominent musicians in the Los Angeles area. The LLC's Federal ID number is 55-5555556. It uses the cash basis and the calendar year and began operations on January 1, 2009. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as Adrianna Venti, Drake Malone, Elena Gomez, Tyler Quick, Queen Bey, and Bruno Mercury and has had a very profitable year. The following information was taken from the LLC's 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	$4,808,800
Expenses
Advertising and public relations	$380,000
Charitable contributions	28,000
179 expense	20,000
Employee salaries and 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
Business restaurant meals and travel (100% deductible)	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

Recently, ROCK has taken advantage of bonus depreciation and 179 deductions and fully remodeled the premises and upgraded its leasehold 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.

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, 2021, ROCK purchased 1,000 shares of Tech, Inc., stock for $100,000; it sold those shares on December 15, 2021, for $80,000. On March 15, 2020, ROCK purchased 2,000 shares of BioLabs, Inc., stock for $136,000; it sold those shares for $160,000 on December 15, 2021. These transactions were reported to the IRS on Forms 1099B; ROCK's basis in these shares was reported.

Net income per books is $840,000. On January 1, 2021, the members' tax basis capital accounts equaled $200,000 each. No additional capital contributions were made in 2021. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year. All contributions and distributions have been in cash, so the LLC has no net unrecognized 704(c) gain or loss. The LLC's balance sheet as of December 31, 2021, 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	$??

The firm's activities do not constitute "qualified production activities" for purposes of the 199 deduction. (Note that the 179 deduction is a business-related expense.) The LLCs UBIA (unadjusted basis immediately after acquisition) equals the total original cost of all leasehold improvements, or $980,000.

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 business code for the entity is 711410.

Schedule M-2 Analysis of Partners' Capital Accounts 1 Balance at beginning of year. 2 Capital contributed: a Cash b Property 3 Net income (loss) per books. 4 Other increases (itemize): Statement 6 5 Add lines 1 through 4. 6 Distributions: 800,000 \begin{tabular}{|l|} \hline \\ \hline \\ \hline \end{tabular} a Cash b Property 7 Other decreases (itemize): 8. Add lines 6 and 7 9 Balance at end of year Subtract line 8 from Statement 7 Stalernent7 8. Add lines 6 and 7 Balance at end of year Subtract line 8 from Statement 3 Form 1065 , Schedule K, Line 20c Other Reportable Items Business Interest Expense (Informational Only for Basis Limitations) included as a Deduction on the Following Lines(s) Schedule K, line 1 Statement 6 Form 1065, Schedule M-2, Line 4 other Increases Tax-Exempt Interest and/or Tax-Exempt Other Income . Total Statement 7 Form 1065, Schedule M-2, Line 7 Other Decreases Guaranteed Payments (other than health insurance) Item L Partner's Capital Account Analysis Other Increase (Decrease) Other Increase Tax-Exempt Interest and/or Tax-Exempt Other Income Other Decrease Guaranteed Payments (other than health insurance) Non-Deductible Expenses Schedule M-2 Analysis of Partners' Capital Accounts 1 Balance at beginning of year. 2 Capital contributed: a Cash b Property 3 Net income (loss) per books. 4 Other increases (itemize): Statement 6 5 Add lines 1 through 4. 6 Distributions: 800,000 \begin{tabular}{|l|} \hline \\ \hline \\ \hline \end{tabular} a Cash b Property 7 Other decreases (itemize): 8. Add lines 6 and 7 9 Balance at end of year Subtract line 8 from Statement 7 Stalernent7 8. Add lines 6 and 7 Balance at end of year Subtract line 8 from Statement 3 Form 1065 , Schedule K, Line 20c Other Reportable Items Business Interest Expense (Informational Only for Basis Limitations) included as a Deduction on the Following Lines(s) Schedule K, line 1 Statement 6 Form 1065, Schedule M-2, Line 4 other Increases Tax-Exempt Interest and/or Tax-Exempt Other Income . Total Statement 7 Form 1065, Schedule M-2, Line 7 Other Decreases Guaranteed Payments (other than health insurance) Item L Partner's Capital Account Analysis Other Increase (Decrease) Other Increase Tax-Exempt Interest and/or Tax-Exempt Other Income Other Decrease Guaranteed Payments (other than health insurance) Non-Deductible Expenses