Ryan Salmon (111-11-1112), Oscar Young (222-22-2223), Clark Coleman (333-33-3334), and Kim Hoffman (444-44-4445) are equal, active, and unrelated members in Salmon Construction LLC (Salmon). Salmon provides residential construction services for clients that build custom homes in the Orange County area. The LLCs Federal ID number is 55-5555556. It uses the cash basis and the calendar year and began operations on January 1, 2008. Its current address is 2501 Irvine Boulevard, Suite 2100, Tustin, CA 28782. The financial information enclosed from the LLCs income statement for the current year. Recently, Salmon has taken advantage of bonus depreciation and 179 deductions and fully remodeled the premises and upgraded its leasehold improvements. This year, Salmon wrapped up its remodel with the purchase of $90,000 of office furniture for which it will claim a 168(k) deduction. (For simplicity, assume that Cam uses the same cost recovery methods for both tax and financial purposes.) There is no depreciation adjustment for alternative minimum tax purposes. Salmon invests much of its excess cash in dividend-paying stocks and tax-exempt securities. During the year, the LLC several securities transactions. On June 15, purchased 1,000 shares of Angus, Inc. stock for $100,000; it sold those shares on December 15 for $80,000. On March 15 of last year, Salmon purchased 2,000 shares of Young Machinery, Inc. stock for $189,000; it sold those shares for $199,500 on December 15 of the current year. These transactions were reported to the IRS on Forms 1099B; Salmons basis in these shares was reported. Each member received an equal guaranteed payment for services rendered. Also, Ryan Salmon loaned the partnership $1,000,000 in 2009. It is an interest only note due in 2028. The LLC issued Ryan a 1099 INT for the interest on the loan. Net income per books is $1,480.700. On January 1, the members capital accounts equaled $300,000 each. No additional capital contributions were made this year. In addition to their guaranteed payments, each member withdrew $200,000 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 LLCs balance sheet as of December 31 of this year is also enclosed. Except for the Ryan Salmon loan, all debt is shared equally by the members. Each member has personally guaranteed the line of credit debt of the LLC. All members are active in LLC operations. For our purposes, assume that Salmons operations constitute one active trade or business for purposes of the passive activity and at-risk limitations. (Note that the 179 deduction is a business-related expense.).

Financial Statements-Cash Basis 12/31/2022 Consulting Revenues 8,500,000 Interest Income Bank of America 7,500 Interest from City of Tustin Bonds 35,000 Long Term Capital Gains 10,500 Short term Capital Loss (20,000) Ordinary Dividends 50,000 Total Revenue 8,583,000 Guaranteed Payments 4,000,000 W-2 Wages 750,000 Advertising 450,000 Charitiable Contributions 99,000 Depreciation 90,000 Repairs and Maintenance 25,000 Interest Expense-Line of Credit 50,000 Interest Expense- Loan from Salmon** 75,000 Legal and Accounting Fees* 132,000 Meals (non restaurant) 250,000 Travel 300,000 Entertainment 250,000 Insurance 52,000 Office Rent 200,000 Office Expense 200,000 Payroll Taxes 100,000 Utilities 54,300 Lobbying 25,000 Total Expenses 7,102,300 Book Income 1,480,700 * Includes $50,000 Legal Fees from a failed acquisition of an engineering firm (not their trade or business) ** 1099 was issued to Mr. Salmon

12/31/2021 12/31/2022 Cash 2,700,000 2,630,700 Marketable Securities 500,000 1,250,000 Office Equipment 960,000 1,050,000 Accumulated Depreciation (960,000) (1,050,000) Total Assets 3,200,000 3,880,700

Line of Credit 1,000,000 1,000,000 Loan from Salmon 1,000,000 1,000,000 Capital Account-Salmon 300,000 470,175 Capital Account-Young 300,000 470,175 Capital Account-Coleman 300,000 470,175 Capital Account-Hoffman 300,000 470,175 Total Liabilities and Equity 3,200,000 3,880,700

Prepare a federal Form 1065, pages 1, 4, and 5, for Salmon Engineering LLC using tax basis information for Schedules L and M2.

Prepare Schedule K1 for all LLC members. Use any address for the partners