Tax Accounting

George and Elaine contribute the following properties to the EG Products, LLC (which is elected to be treated as a partnership): Partne Tax Basis |Fair Value at Contribution r George Cash 25,000 25,000 Inventory 25,000 40,000 Elaine Inventory|20,000 30,000 Cash 45,000 45,000 The inventory contributed by Elaine is subject to a recourse liability of $10,000 th is assumed by the partnership. The partnership also borrows another $20,000 fro a bank to help with cash flow. Each partner is an equal 50% partner for all purposes (profit, loss, capital, and liability sharing). However, Elaine will receive a guaranteed payment of $10,000 and George will receive a guaranteed payment of $5,000 During the first year, the partnership does the following: 1) Sells the inventory contributed by George for $42,000; 2) Sells the inventory contributed by Elaine for $34,000. 3) The partnership purchases equipment for $10,000 to use in the business. For tax purposes, the partnership makes a Section 179 election to expense the equipment. For book purposes, the partnership depreciates the equipment straight-line over 5 years with no salvage value. 4) Spends $80,000 to buy additional inventory and sells $60,000 of that inventory for $90,000 (both for book and tax). 6) Incurs book and tax other operating expenses of $10,000. 6) Pays $4,000 of the liability contributed by Elaine. Assume that all items involve cash except for depreciation on equipment