TAX FORM/RETURN PREPARATION PROBLEMS C:9-57 The Dapper-Dons Partnership was formed ten years ago as a general partnership to cus-tom tailor mens clothing. Dapper-Dons is located at 123 Flamingo Drive in City, ST, 54321. Bob Dapper manages the business and has a 40% capital and profits interest. His address is 709 Brumby Way, City, ST, 54321. Jeremy Dons owns the remaining 60% interest but is not active in the business. His address is 807 Ninth Avenue, City, ST, 54321. The partnership values its inventory using the cost method and did not change the method used during the current year. The partnership uses the accrual method of accounting. The partnership has no foreign partners, no foreign transactions, no inter-ests in foreign trusts, and no foreign financial accounts. This partnership is neither a tax shelter nor a publicly traded partnership. No changes in ownership of partnership interests occurred during the current year. The partnership made cash distributions of $155,050 and $232,576 to Dapper and Dons, respectively, on December 30 of the cur-rent year. It made no other property distributions. Financial statements for the current year are presented in Tables C:9-1 and C:9-2. Bob Dapper is the Designated Partnership Representative. Prepare a current year partnership tax return for Dapper-Dons Partnership (form 1065, balance sheet)

Partnership Formation and Operation Corporations 9-51 TABLE C:9-1 Dapper-Dons Partnership Income Statement for the 12 Months Ending December 31 of the Current Year (Problem C:9-57) 52,357,000 (20,000) $2,337,000 $ 200.050 624,000 600,000 54,000 51,478,050 (146,000) (1,332,050) $ 1,004,950 Sales Returns and allowances Beginning inventory (FIFO method) Purchases Labor (W-2 wages) Other costs Goods available for sale Ending inventory Gross profit Salaries for employees other than partners (W-2 wages) Guaranteed payment to Dapper for services Utilities expense Depreciation (MACRS depreciation is $74,311) Automobile expense Office supplies expense Advertising expense Bad debt expense Interest expense (all business related) Rent expense Travel expense (meals cost $4,050 of this amount) Repairs and maintenance expense Accounting and legal expense Charitable contributions Payroll taxes Other Laxes (all trade-or business-related) Total expenses Operating profit Other income and losses: Gain on sale of AB stock Loss on sale of CD stock Sec. 1231 gain on sale of land Interest on U.S. Treasury bills for entire year ($80,000 face amount) Dividends from 15%-owned domestic corporation Net income 551,000 85,000 46,428 49,782 12,085 4,420 85,000 2,100 45,000 7,400 11,020 68,300 3,600 16,400 5,180 1,400 494,115 5 510,835 $ 18,000 (26,075) 5.050 2.000 11,000 9,975 $ 520,810 The partnership reports a $10,000 positive AMT adjustment for property placed in service after 1986 The partnership made all contributions in cash to qualifying charities The partnership purchased the AB stock as an investment two years ago on December 1 for $40,000 and sold it on June 14 of the current your for $58,000 The partnership purchased the CD stock as an investment on February 15 of the current year for $100,000 and sold it on August 1 for $73.925 The partnership used the land as a parking lot for the business. The partnership purchased the land four years ago on March 17 for $30,000 and sold it on August 15 of the current year for $35,050 Chapter 9 TABLE C:9-2 Dapper-Dons Partnership Balance Sheet for January 1 and December 31 of the Current Year (Problem C:9-57) Balance January 1 Balance December 31 $ 10,000 72,600 200.050 220,000 337,434 (123,318) 185,000 5901,766 $ 40,000 150,100 146,000 260,000 465,000 (173,100) 240,000 $1,128,000 Assets Cash Accounts receivable Inventories Marketable securities Building and equipment Minus: Accumulated depreciation Land Total assets Liabilities and equities: Accounts payable Accrued salaries payable Payroll taxes payable Sales taxes payable Mortgage and notes payable (current maturities) Long-term debt Capital: Dapper Dons Total liabilities and equities $ 35,000 14,000 3,416 5,200 44,000 210,000 $ 46,000 18,000 7,106 6,560 52,000 275,000 236,060 354,090 5901,766 289,334 434,000 $1,128,000 Short-term investments, $80,000 of which are Treasury bills acquired in the current year. Partnership Formation and Operation Corporations 9-51 TABLE C:9-1 Dapper-Dons Partnership Income Statement for the 12 Months Ending December 31 of the Current Year (Problem C:9-57) 52,357,000 (20,000) $2,337,000 $ 200.050 624,000 600,000 54,000 51,478,050 (146,000) (1,332,050) $ 1,004,950 Sales Returns and allowances Beginning inventory (FIFO method) Purchases Labor (W-2 wages) Other costs Goods available for sale Ending inventory Gross profit Salaries for employees other than partners (W-2 wages) Guaranteed payment to Dapper for services Utilities expense Depreciation (MACRS depreciation is $74,311) Automobile expense Office supplies expense Advertising expense Bad debt expense Interest expense (all business related) Rent expense Travel expense (meals cost $4,050 of this amount) Repairs and maintenance expense Accounting and legal expense Charitable contributions Payroll taxes Other Laxes (all trade-or business-related) Total expenses Operating profit Other income and losses: Gain on sale of AB stock Loss on sale of CD stock Sec. 1231 gain on sale of land Interest on U.S. Treasury bills for entire year ($80,000 face amount) Dividends from 15%-owned domestic corporation Net income 551,000 85,000 46,428 49,782 12,085 4,420 85,000 2,100 45,000 7,400 11,020 68,300 3,600 16,400 5,180 1,400 494,115 5 510,835 $ 18,000 (26,075) 5.050 2.000 11,000 9,975 $ 520,810 The partnership reports a $10,000 positive AMT adjustment for property placed in service after 1986 The partnership made all contributions in cash to qualifying charities The partnership purchased the AB stock as an investment two years ago on December 1 for $40,000 and sold it on June 14 of the current your for $58,000 The partnership purchased the CD stock as an investment on February 15 of the current year for $100,000 and sold it on August 1 for $73.925 The partnership used the land as a parking lot for the business. The partnership purchased the land four years ago on March 17 for $30,000 and sold it on August 15 of the current year for $35,050 Chapter 9 TABLE C:9-2 Dapper-Dons Partnership Balance Sheet for January 1 and December 31 of the Current Year (Problem C:9-57) Balance January 1 Balance December 31 $ 10,000 72,600 200.050 220,000 337,434 (123,318) 185,000 5901,766 $ 40,000 150,100 146,000 260,000 465,000 (173,100) 240,000 $1,128,000 Assets Cash Accounts receivable Inventories Marketable securities Building and equipment Minus: Accumulated depreciation Land Total assets Liabilities and equities: Accounts payable Accrued salaries payable Payroll taxes payable Sales taxes payable Mortgage and notes payable (current maturities) Long-term debt Capital: Dapper Dons Total liabilities and equities $ 35,000 14,000 3,416 5,200 44,000 210,000 $ 46,000 18,000 7,106 6,560 52,000 275,000 236,060 354,090 5901,766 289,334 434,000 $1,128,000 Short-term investments, $80,000 of which are Treasury bills acquired in the current year