Tax Return Problem: Partnership

Instructions:

Please complete the required federal partnership income tax return forms for AAA Fast Plumbing for the 2014 tax year based upon the facts presented below. If required information is missing, use reasonable assumptions to fill in the gaps. Ignore all AMT calculations and AMT related tax differences. You must complete for submission Form 1065, Schedule B-1 and Form 4562. You must use 2014 forms.

Michael Rodriguez and Devontae Johnson have been life-long friends. Both Michael and Devontae started to work for the same national plumbing repair company immediately after graduating from technical college. After nearly a decade of working for that same company, Michael and Devontae decided to venture out on their own and form their own plumbing company called AAA Fast Plumbing Repair (AAA). They formed AAA as a limited liability company (LLC). Michael and Devontae each own 50% of the company. The company has been successful primarily based upon reputation and the fact that AAA is available 24 hours a day, seven days a week. Although AAA charges a premium for after normal business hour calls, most of its competitors will not perform services past 9 p.m. and, as a result, AAA finds itself often as one of the only available choices for middle of the night emergencies.

AAA has several employees and, as a result of implementing technology solutions to aid in its call dispatch program, AAA has been able to expand its service area to now include a three-county area instead of just one.

Information relating to AAA and its owners is as follows:

Name of Company: AAA Fast Plumbing Repair, LLC

Address: 1456 East Buena Vista Blvd.

Los Angeles, CA 90001 (has not changed since inception)

Company formed and started: January 1, 2008

Accounting Method: Cash

Tax-year end: December 31

Employer Identification Number: 34-1234567

Members' Information:

Michael Rodriguez

1515 West Bloomington Street

Los Angeles, CA 90001

SSN- 585-31-6060

Profit/Loss/Capital membership interest is 50%.

Devontae Johnson

19 East Violet Circle

Los Angeles, CA 90001

SSN: 397-29-9239

Profit/Loss/Capital membership interest is 50%.

Other information:

• AAA is a domestic limited liability company
• Michael and Devontae are not related.
• Michael and Devontae are both U.S. citizens.
• Both Michael and Devontae are managing members.
• AAA has not and did not file a Form 8893 or anything similar to it this year or in the past.
• AAA is not a publicly traded partnership.
• During the year no debt was cancelled or forgiven in relation to AAA.
• AAA is not required to file a Form 8918.
• AAA did not have or control a foreign bank account or have authority over any such financial account.
• AAA was not the grantor of or a transferor to a foreign trust.
• AAA has never made a Section 754 election.
• AAA has never entered into a like-kind exchange or distributed a tenancy-in-common or other undivided interest in partnership property.
• AAA has never been required to file Form 8858.
• AAA was required to file Form(s) 1099 related to certain payments it made during the year and those forms were filed on a timely basis.
• AAA was not required to file any Form(s) 5471 during the year.
• Michael is the Tax Matters Partner (TMP).
• Both Michael and Devontae are active in the business and work full-time for AAA.
• The debt owed to First National Bank is a non-recourse obligation and neither Michael nor Devontae have guaranteed its repayment (see balance sheet below). This debt is not directly tied to any specific asset but is rather a debt secured against all of the assets of the company, with neither Michael nor Devontae personally responsible for its repayment.
• During the year, Michael and Devontae each contributed $20,000 to the capital of AAA
• AAA does not maintain any inventory. AAA purchases supplies and has a policy of expensing such purchases as paid for tax and book purposes consistent with existing tax law.
• AAA uses MACRS depreciation for both tax and book purposes.
• During the year, Michael and Devontae each received a $75,000 distribution from AAA.
• During the year, AAA acquired the following assets (all assets were placed in service on the acquisition dates as indicated below):
• Service vans-new (not Luxury Automobiles) July 1, 2014 $500,000
• Plumbing machinery/equipment-new July 1, 2014 $250,000

AAA did not claim Section 179 expense for any of the current year asset additions but it did claim available bonus depreciation.

Financial Statements:

Balance Sheet

Assets: 1/01/14 12/31/14

Cash $ 30,000 $ 45,000

Tax-exempt Securities 100,000 100,000

Building 4,000,000 4,000,000

Less: Acc. Depreciation (551,282) (653,842)

Equipment 2,500,000 3,250,000

Less: Acc. Depreciation (1,481,400) (2,231,663)

Land 1,000,000 1,000,000

Total Assets: $5,597,318 $5,509,495

Liabilities and Capital:

Note Payable-First National Bank $4,267,318 $4,046,673

Note Payable-Michael Rodriguez 300,000 300,000

Note Payable-Devontae Johnson 200,000 200,000

Capital Account-MR 415,000 481,411

Capital Account-DJ 415,000 481,411

Total Liabilities and Capital: $5,597,318 $5,509,495

Income Statement for the year ending December 31, 2014

Item Amount

Income:

Service Revenue-Cash $ 343,565

Service Revenue-Credit Cards $1,922,710

Consulting Revenue-Cash $ 50,950

Consulting Revenue-Credit Cards $ 155,005

Interest Income-First National Bank $ 1,540

Municipal Bond Interest Income $ 2,500

Total Income: $2,476,270

Expenses:

Employee Salaries $ 515,735

Guaranteed payment-MR $ 50,000

Guaranteed payment-DJ $ 50,000

Repairs and Maintenance-Trucks $ 113,415

Rent $ 35,000

Payroll Taxes $ 41,260

Licensing Fees $ 1,750

Property Taxes $ 77,000

Interest Expense $ 235,000

Depreciation $ 852,823

Office Supplies $ 3,420

Employee Training $ 5,675

Advertising $ 18,850

Plumbing supplies $ 15,125

Meals and Entertainment (prior to disallowance) $ 13,740

Travel $ 4,210

Gasoline $ 158,675

Utilities $ 24,940

Telephone $ 16,830

Total Expenses: $2,233,448

Net Income: $ 242,822

SCHEDULE B-1 (Form 1065) (Rev. December 2011) Department of the Treasury Internal Revenue Service Name of partnership Part I Information on Partners Owning 50% or More of the Partnership Attach OMB No. 1545-0099 to Form 1065. See instructions on back. Employer identification number (EIN) Entities Owning 50% or More of the Partnership (Form 1065, Schedule B, Question 3a) Complete columns (i) through (v) below for any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, tax-exempt organization, or any foreign government that owns, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership (see instructions). (i) Name of Entity Part II (ii) Employer Identification Number (if any) (iii) Type of Entity (iv) Country of Organization (v) Maximum Percentage Owned in Profit, Loss, or Capital Individuals or Estates Owning 50% or More of the Partnership (Form 1065, Schedule B, Question 3b) Complete columns (i) through (iv) below for any individual or estate that owns, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership (see instructions). (i) Name of Individual or Estate (ii) Identifying Number (if any) For Paperwork Reduction Act Notice, see the Instructions for Form 1065. (iii) Country of Citizenship (see instructions) Cat. No. 49842K (iv) Maximum Percentage Owned in Profit, Loss, or Capital Schedule B-1 (Form 1065) (Rev. 12-2011) Page 2 Schedule B-1 (Form 1065) (Rev. 12-2011) General Instructions Section references are to the Internal Revenue Code unless otherwise noted. Purpose of Form Use Schedule B-1 (Form 1065) to provide the information applicable to certain entities, individuals, and estates that own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership. Who Must File Schedule B-1 (Form 1065) must be filed by all partnerships that answer \"Yes\" to question 3a or question 3b on Schedule B of Form 1065. Attach Schedule B-1 to Form 1065. Specific Instructions Part I Complete Part I if the partnership answered \"Yes\" to Form 1065, Schedule B, question 3a. List each corporation, partnership, trust, tax-exempt organization, or foreign government owning, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership at the end of the tax year. Enter the name, EIN, type of entity (corporation, partnership, trust, tax-exempt organization, or foreign government), country of organization, and the maximum percentage interests owned, directly or indirectly, in the profit, loss, or capital of the partnership. For an affiliated group filing a consolidated tax return, list the parent corporation rather than the subsidiary members. List the entity owner of a disregarded entity rather than the disregarded entity. If the owner of a disregarded entity is an individual rather than an entity, list the individual in Part II. In the case of a tax-exempt organization, enter \"tax-exempt organization\" in column (iii). Example 1. Corporation A owns, directly, an interest of 50% in the profit, loss, or capital of Partnership B. Corporation A also owns, directly, an interest of 15% in the profit, loss, or capital of Partnership C. Partnership B owns, directly, an interest of 70% in the profit, loss, or capital of Partnership C. Therefore, Corporation A owns, directly or indirectly, an interest of 50% in the profit, loss, or capital of Partnership C (15% directly and 35% indirectly through Partnership B). On Partnership C's Form 1065, it must answer \"Yes\" to question 3a of Schedule B. Partnership C must also complete Part I of Schedule B-1. In Part I, Partnership C must identify Corporation A, which includes entering \"50%\" in column (v) (its maximum percentage owned). It also must identify Partnership B, and enter \"70%\" in column (v). Part II Complete Part II if the partnership answered \"Yes\" to Form 1065, Schedule B, question 3b. List each individual or estate owning, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership at the end of the tax year. Enter the name, social security or employer identification number, country of citizenship (for an estate, the citizenship of the decedent), and the maximum percentage interests owned, directly or indirectly, in the profit, loss, or capital of the partnership. Example 2. A owns, directly, 50% of the profit, loss, or capital of Partnership X. B, the daughter of A, does not own, directly, any interest in X and does not own, indirectly, any interest in X through any entity (corporation, partnership, trust, or estate). Because family attribution rules apply only when an individual (in this example, B) owns a direct interest in the partnership or an indirect interest through another entity, A's interest in Partnership X is not attributable to B. On Partnership X's Form 1065, it must answer \"Yes\" to question 3b of Schedule B. Partnership X must also complete Part II of Schedule B-1. In Part II, Partnership X must identify A, which includes entering \"50%\" in column (iv). Partnership X will not identify B in Part II. Form 4562 Depreciation and Amortization Attach Information to your tax return. about Form 4562 and its separate instructions is at www.irs.gov/form4562. Name(s) shown on return 1 2 3 4 5 Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part I. (a) Description of property (b) Cost (business use only) . . . . . . . . . . . . married . . . . . . . . . . . filing . . 1 2 3 4 5 (c) Elected cost 7 Listed property. Enter the amount from line 29 . . . . . . . . . 7 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 . . . . . . 9 Tentative deduction. Enter the smaller of line 5 or line 8 . . . . . . . . . . . . . . . . 10 Carryover of disallowed deduction from line 13 of your 2013 Form 4562 . . . . . . . . . . . 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions) 12 Section 179 expense deduction. Add lines 9 and 10, but do not enter more than line 11 . . . . . 13 13 Carryover of disallowed deduction to 2015. Add lines 9 and 10, less line 12 Note: Do not use Part II or Part III below for listed property. Instead, use Part V. Part II Attachment Sequence No. 179 Identifying number Business or activity to which this form relates Maximum amount (see instructions) . . . . . . . . . . . . . . . . . . Total cost of section 179 property placed in service (see instructions) . . . . . . Threshold cost of section 179 property before reduction in limitation (see instructions) . Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- . . . . . Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If separately, see instructions . . . . . . . . . . . . . . . . . . . . 6 2014 (Including Information on Listed Property) Department of the Treasury Internal Revenue Service (99) Part I OMB No. 1545-0172 8 9 10 11 12 Special Depreciation Allowance and Other Depreciation (Do not include listed property.) (See instructions.) 14 Special depreciation allowance for qualified property (other than listed property) placed in service during the tax year (see instructions) . . . . . . . . . . . . . . . . . . . . . . 15 Property subject to section 168(f)(1) election . 16 Other depreciation (including ACRS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 16 Part III MACRS Depreciation (Do not include listed property.) (See instructions.) Section A 17 17 MACRS deductions for assets placed in service in tax years beginning before 2014 . . . . . . . 18 If you are electing to group any assets placed in service during the tax year into one or more general asset accounts, check here . . . . . . . . . . . . . . . . . . . . . . Section BAssets Placed in Service During 2014 Tax Year Using the General Depreciation System (a) Classification of property (b) Month and year placed in service (c) Basis for depreciation (business/investment use onlysee instructions) 19a b c d e f g h 3-year property 5-year property 7-year property 10-year property 15-year property 20-year property 25-year property Residential rental property i Nonresidential real property (d) Recovery period 25 yrs. 27.5 yrs. 27.5 yrs. 39 yrs. (e) Convention (f) Method MM MM MM MM S/L S/L S/L S/L S/L (g) Depreciation deduction Section CAssets Placed in Service During 2014 Tax Year Using the Alternative Depreciation System S/L 20a Class life 12 yrs. S/L b 12-year 40 yrs. MM S/L c 40-year Part IV Summary (See instructions.) 21 Listed property. Enter amount from line 28 . . . . . . . . . . . . . . . . . . . . 22 Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21. Enter here and on the appropriate lines of your return. Partnerships and S corporationssee instructions . 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs . . . . . . . 23 For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 12906N 21 22 Form 4562 (2014) Page 2 Listed Property (Include automobiles, certain other vehicles, certain aircraft, certain computers, and property used for entertainment, recreation, or amusement.) Form 4562 (2014) Part V Note: For any vehicle for which you are using the standard mileage rate or deducting lease expense, complete only 24a, 24b, columns (a) through (c) of Section A, all of Section B, and Section C if applicable. Section ADepreciation and Other Information (Caution: See the instructions for limits for passenger automobiles.) 24a Do you have evidence to support the business/investment use claimed? 24b If \"Yes,\" is the evidence written? Yes No Yes (c) (a) (b) Business/ (d) Type of property (list Date placed investment use Cost or other basis vehicles first) in service percentage (e) Basis for depreciation (business/investment use only) (f) Recovery period (g) Method/ Convention (h) Depreciation deduction No (i) Elected section 179 cost 25 Special depreciation allowance for qualified listed property placed in service during the tax year and used more than 50% in a qualified business use (see instructions) . 25 26 Property used more than 50% in a qualified business use: % % % 27 Property used 50% or less in a qualified business use: S/L - % S/L - % S/L - % 28 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 . 28 29 Add amounts in column (i), line 26. Enter here and on line 7, page 1 . . . . . . . . . . . . 29 Section BInformation on Use of Vehicles Complete this section for vehicles used by a sole proprietor, partner, or other \"more than 5% owner,\" or related person. If you provided vehicles to your employees, first answer the questions in Section C to see if you meet an exception to completing this section for those vehicles. (a) Vehicle 1 30 Total business/investment miles driven during the year (do not include commuting miles) . 31 Total commuting miles driven during the year 32 Total other personal (noncommuting) miles driven . . . . . . . . . 33 Total miles driven during the year. Add lines 30 through 32 . . . . . . . 34 Was the vehicle available for personal use during off-duty hours? . . . . . 35 Was the vehicle used primarily by a more than 5% owner or related person? . . Yes No (b) Vehicle 2 Yes No (c) Vehicle 3 Yes (d) Vehicle 4 No Yes No (e) Vehicle 5 Yes (f) Vehicle 6 No Yes No 36 Is another vehicle available for personal use? Section CQuestions for Employers Who Provide Vehicles for Use by Their Employees Answer these questions to determine if you meet an exception to completing Section B for vehicles used by employees who are not more than 5% owners or related persons (see instructions). No 37 Do you maintain a written policy statement that prohibits all personal use of vehicles, including commuting, by Yes your employees? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Do you maintain a written policy statement that prohibits personal use of vehicles, except commuting, by your employees? See the instructions for vehicles used by corporate officers, directors, or 1% or more owners . . 39 Do you treat all use of vehicles by employees as personal use? . . . . . . . . . . . . . . . . 40 Do you provide more than five vehicles to your employees, obtain information from your employees about the use of the vehicles, and retain the information received? . . . . . . . . . . . . . . . . . . . 41 Do you meet the requirements concerning qualified automobile demonstration use? (See instructions.) . Note: If your answer to 37, 38, 39, 40, or 41 is \"Yes,\" do not complete Section B for the covered vehicles. . . Part VI Amortization (a) Description of costs (b) Date amortization begins (c) Amortizable amount (e) Amortization period or percentage (d) Code section (f) Amortization for this year 42 Amortization of costs that begins during your 2014 tax year (see instructions): 43 Amortization of costs that began before your 2014 tax year . . . . . . 44 Total. Add amounts in column (f). See the instructions for where to report . . . . . . . . . . . . . . . 43 44 Form 4562 (2014) 1065 U.S. Return of Partnership Income Form Department of the Treasury Internal Revenue Service A Principal business activity For calendar year 2014, or tax year beginning B Principal product or service Type or Print C Business code number OMB No. 1545-0123 , 2014, ending , 20 2014 . Information about Form 1065 and its separate instructions is at www.irs.gov/form1065. Name of partnership D Employer identification number Number, street, and room or suite no. If a P.O. box, see the instructions. E Date business started City or town, state or province, country, and ZIP or foreign postal code F Total assets (see the instructions) $ G H I J (1) (2) (3) Initial return Final return Name change (4) Address change (6) Technical termination - also check (1) or (2) Other (specify) Check accounting method: (1) Cash (2) Accrual (3) Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year (5) Check applicable boxes: Check if Schedules C and M-3 are attached . . . . . . . . . . . . . . . . . . . . . . . Amended return . . . . . Deductions (see the instructions for limitations) Income Caution. Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information. 1a b c 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16a b 17 18 19 20 21 22 Signature of general partner or limited liability company member manager Print/Type preparer's name Firm's name Preparer's signature Paid Preparer Use Only 1c 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16c 17 18 19 20 21 22 Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than general partner or limited liability company member manager) is based on all information of which preparer has any knowledge. Sign Here 1a Gross receipts or sales . . . . . . . . . . . . . Returns and allowances . . . . . . . . . . . . 1b Balance. Subtract line 1b from line 1a . . . . . . . . . . . . . . . . . . Cost of goods sold (attach Form 1125-A) . . . . . . . . . . . . . . . . Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . . Ordinary income (loss) from other partnerships, estates, and trusts (attach statement) . . Net farm profit (loss) (attach Schedule F (Form 1040)) . . . . . . . . . . . . Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . . Other income (loss) (attach statement) . . . . . . . . . . . . . . . . . Total income (loss). Combine lines 3 through 7 . . . . . . . . . . . . . . Salaries and wages (other than to partners) (less employment credits) . . . . . . . Guaranteed payments to partners . . . . . . . . . . . . . . . . . . . Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation (if required, attach Form 4562) . . . . . . 16a Less depreciation reported on Form 1125-A and elsewhere on return 16b Depletion (Do not deduct oil and gas depletion.) . . . . . . . . . . . . . Retirement plans, etc. . . . . . . . . . . . . . . . . . . . . . . . Employee benefit programs . . . . . . . . . . . . . . . . . . . . . Other deductions (attach statement) . . . . . . . . . . . . . . . . . . Total deductions. Add the amounts shown in the far right column for lines 9 through 20 . Ordinary business income (loss). Subtract line 21 from line 8 . . . . . . . . . May the IRS discuss this return with the preparer shown below (see instructions)? Yes No Date Date PTIN Firm's EIN Firm's address For Paperwork Reduction Act Notice, see separate instructions. Check if self-employed Phone no. Cat. No. 11390Z Form 1065 (2014) Form 1065 (2014) Schedule B 1 a c e 2 3 a Page 2 Other Information What type of entity is filing this return? Check the applicable box: Domestic general partnership b Domestic limited partnership Domestic limited liability company d Domestic limited liability partnership Foreign partnership f Other At any time during the tax year, was any partner in the partnership a disregarded entity, a partnership (including an entity treated as a partnership), a trust, an S corporation, an estate (other than an estate of a deceased partner), or a nominee or similar person? . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No At the end of the tax year: Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or taxexempt organization, or any foreign government own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership? For rules of constructive ownership, see instructions. If \"Yes,\" attach Schedule B-1, Information on Partners Owning 50% or More of the Partnership . . . . . . . . . . . . . . . b Did any individual or estate own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership? For rules of constructive ownership, see instructions. If \"Yes,\" attach Schedule B-1, Information on Partners Owning 50% or More of the Partnership . . . . . . . . . . . . . . . . . . . . 4 a At the end of the tax year, did the partnership: Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of stock entitled to vote of any foreign or domestic corporation? For rules of constructive ownership, see instructions. If \"Yes,\" complete (i) through (iv) below . . . . . . . . . . . . . . . . . . . . . (i) Name of Corporation (ii) Employer Identification Number (if any) (iii) Country of Incorporation (iv) Percentage Owned in Voting Stock b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If \"Yes,\" complete (i) through (v) below . . (i) Name of Entity (ii) Employer Identification Number (if any) (iii) Type of Entity (iv) Country of Organization (v) Maximum Percentage Owned in Profit, Loss, or Capital Yes 5 No Did the partnership file Form 8893, Election of Partnership Level Tax Treatment, or an election statement under section 6231(a)(1)(B)(ii) for partnership-level tax treatment, that is in effect for this tax year? See Form 8893 for more details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Does the partnership satisfy all four of the following conditions? a The partnership's total receipts for the tax year were less than $250,000. b The partnership's total assets at the end of the tax year were less than $1 million. c Schedules K-1 are filed with the return and furnished to the partners on or before the due date (including extensions) for the partnership return. d The partnership is not filing and is not required to file Schedule M-3 . . . . . . . . . . . . . . . If \"Yes,\" the partnership is not required to complete Schedules L, M-1, and M-2; Item F on page 1 of Form 1065; or Item L on Schedule K-1. 7 Is this partnership a publicly traded partnership as defined in section 469(k)(2)? . . . . . . . . . . . . During the tax year, did the partnership have any debt that was cancelled, was forgiven, or had the terms 8 modified so as to reduce the principal amount of the debt? . . . . . . . . . . . . . . . . . . Has this partnership filed, or is it required to file, Form 8918, Material Advisor Disclosure Statement, to provide 9 information on any reportable transaction? . . . . . . . . . . . . . . . . . . . . . . . . 10 At any time during calendar year 2014, did the partnership have an interest in or a signature or other authority over a financial account in a foreign country (such as a bank account, securities account, or other financial account)? See the instructions for exceptions and filing requirements for FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). If \"Yes,\" enter the name of the foreign country. Form 1065 (2014) Form 1065 (2014) Schedule B Page Yes 11 3 Other Information (continued) No At any time during the tax year, did the partnership receive a distribution from, or was it the grantor of, or transferor to, a foreign trust? If \"Yes,\" the partnership may have to file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. See instructions . . . . . . . . . 12a Is the partnership making, or had it previously made (and not revoked), a section 754 election? . . . . . . See instructions for details regarding a section 754 election. b Did the partnership make for this tax year an optional basis adjustment under section 743(b) or 734(b)? If \"Yes,\" attach a statement showing the computation and allocation of the basis adjustment. See instructions . . . . c 13 14 15 16 17 Is the partnership required to adjust the basis of partnership assets under section 743(b) or 734(b) because of a substantial built-in loss (as defined under section 743(d)) or substantial basis reduction (as defined under section 734(d))? If \"Yes,\" attach a statement showing the computation and allocation of the basis adjustment. See instructions Check this box if, during the current or prior tax year, the partnership distributed any property received in a like-kind exchange or contributed such property to another entity (other than disregarded entities wholly owned by the partnership throughout the tax year) . . . . . . . . . . . . . . . . . . . At any time during the tax year, did the partnership distribute to any partner a tenancy-in-common or other undivided interest in partnership property? . . . . . . . . . . . . . . . . . . . . . . . . If the partnership is required to file Form 8858, Information Return of U.S. Persons With Respect To Foreign Disregarded Entities, enter the number of Forms 8858 attached. See instructions Does the partnership have any foreign partners? If \"Yes,\" enter the number of Forms 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, filed for this partnership. Enter the number of Forms 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, attached to this return. 18a Did you make any payments in 2014 that would require you to file Form(s) 1099? See instructions . . . . . b If \"Yes,\" did you or will you file required Form(s) 1099? . . . . . . . . . . . . . . . . . . . . Enter the number of Form(s) 5471, Information Return of U.S. Persons With Respect To Certain Foreign 19 Corporations, attached to this return. 20 Enter the number of partners that are foreign governments under section 892. Designation of Tax Matters Partner (see instructions) Enter below the general partner or member-manager designated as the tax matters partner (TMP) for the tax year of this return: Identifying number of TMP Phone number of TMP Name of designated TMP If the TMP is an entity, name of TMP representative Address of designated TMP Form 1065 (2014) Form 1065 (2014) Schedule K 1 2 3a Income (Loss) b c 4 5 6 7 8 9a Alternative Other Information Minimum Tax (AMT) Items Foreign Transactions Credits SelfEmploy- Deductions ment b c 10 11 12 13a b c d 14a b c 15a b c d e f 16a b c d g i l m n 17a b c d e f 18a b c 19a b 20a b c Page Partners' Distributive Share Items 4 Total amount Ordinary business income (loss) (page 1, line 22) . . . . . . . . . . . . . 1 Net rental real estate income (loss) (attach Form 8825) . . . . . . . . . . . 2 Other gross rental income (loss) . . . . . . . . 3a Expenses from other rental activities (attach statement) 3b Other net rental income (loss). Subtract line 3b from line 3a . . . . . . . . . 3c Guaranteed payments . . . . . . . . . . . . . . . . . . . . . 4 Interest income . . . . . . . . . . . . . . . . . . . . . . . . 5 Dividends: 6a a Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . 6b b Qualified dividends Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Net short-term capital gain (loss) (attach Schedule D (Form 1065)) . . . . . . . 8 Net long-term capital gain (loss) (attach Schedule D (Form 1065)) . . . . . . . 9a Collectibles (28%) gain (loss) . . . . . . . . . 9b Unrecaptured section 1250 gain (attach statement) . . 9c Net section 1231 gain (loss) (attach Form 4797) . . . . . . . . . . . . . 10 Other income (loss) (see instructions) Type 11 Section 179 deduction (attach Form 4562) . . . . . . . . . . . . . . . 12 Contributions . . . . . . . . . . . . . . . . . . . . . . . . 13a Investment interest expense . . . . . . . . . . . . . . . . . . . 13b (1) Type Section 59(e)(2) expenditures: (2) Amount 13c(2) Other deductions (see instructions) Type 13d Net earnings (loss) from self-employment . . . . . . . . . . . . . . . 14a Gross farming or fishing income . . . . . . . . . . . . . . . . . . 14b Gross nonfarm income . . . . . . . . . . . . . . . . . . . . . 14c Low-income housing credit (section 42(j)(5)) . . . . . . . . . . . . . . 15a Low-income housing credit (other) . . . . . . . . . . . . . . . . . 15b Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable) 15c Type 15d Other rental real estate credits (see instructions) Type Other rental credits (see instructions) 15e Other credits (see instructions) Type 15f Name of country or U.S. possession Gross income from all sources . . . . . . . . . . . . . . . . . . . 16b Gross income sourced at partner level . . . . . . . . . . . . . . . . 16c Foreign gross income sourced at partnership level Passive category e General category f Other 16f Deductions allocated and apportioned at partner level Interest expense h Other . . . . . . . . . . 16h Deductions allocated and apportioned at partnership level to foreign source income Passive category j General category k Other 16k Total foreign taxes (check one): Paid Accrued . . . . . . . . 16l Reduction in taxes available for credit (attach statement) . . . . . . . . . . 16m Other foreign tax information (attach statement) . . . . . . . . . . . . . Post-1986 depreciation adjustment . . . . . . . . . . . . . . . . . 17a Adjusted gain or loss . . . . . . . . . . . . . . . . . . . . . . 17b Depletion (other than oil and gas) . . . . . . . . . . . . . . . . . . 17c Oil, gas, and geothermal propertiesgross income . . . . . . . . . . . . 17d Oil, gas, and geothermal propertiesdeductions . . . . . . . . . . . . . 17e Other AMT items (attach statement) . . . . . . . . . . . . . . . . . 17f Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . 18a Other tax-exempt income . . . . . . . . . . . . . . . . . . . . 18b Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . 18c Distributions of cash and marketable securities . . . . . . . . . . . . . 19a Distributions of other property . . . . . . . . . . . . . . . . . . . 19b Investment income . . . . . . . . . . . . . . . . . . . . . . . 20a Investment expenses . . . . . . . . . . . . . . . . . . . . . . 20b Other items and amounts (attach statement) . . . . . . . . . . . . . . Form 1065 (2014) Form 1065 (2014) Page 5 Analysis of Net Income (Loss) Net income (loss). Combine Schedule K, lines 1 through 11. From the result, subtract the sum of Schedule K, lines 12 through 13d, and 16l . . . . . . . . . . . . . . . . . . 1 Analysis by (ii) Individual (iii) Individual (v) Exempt (i) Corporate (iv) Partnership (active) (passive) Organization partner type: 1 2 (vi) Nominee/Other a General partners b Limited partners Schedule L 1 2a b 3 4 5 6 7a b 8 9a b 10a b 11 12a b 13 14 15 16 17 18 19a b 20 21 22 Assets Cash . . . . . . . . . . . . . Trade notes and accounts receivable . . . Less allowance for bad debts . . . . . Inventories . . . . . . . . . . . U.S. government obligations . . . . . Tax-exempt securities . . . . . . . Other current assets (attach statement) . . Loans to partners (or persons related to partners) Mortgage and real estate loans . . . . Other investments (attach statement) . . . Buildings and other depreciable assets . . Less accumulated depreciation . . . . Depletable assets . . . . . . . . . Less accumulated depletion . . . . . Land (net of any amortization) . . . . . Intangible assets (amortizable only) . . . Less accumulated amortization . . . . Other assets (attach statement) . . . . Total assets . . . . . . . . . . . Liabilities and Capital Accounts payable . . . . . . . . . Other current liabilities (attach statement) All nonrecourse loans . . . . . . . Other liabilities (attach statement) . Partners' capital accounts . . . Total liabilities and capital . . . . . . (d) . . . . . . . . Reconciliation of Income (Loss) per Books With Income (Loss) per Return Note. The partnership may be required to file Schedule M-3 (see instructions). Net income (loss) per books . . . . Income recorded on books this year not included 6 Income included on Schedule K, lines 1, 2, 3c, 5, 6a, 7, 8, 9a, 10, and 11, not recorded on books this year (itemize): 3 Guaranteed payments (other than health insurance) . . . . . . . 4 Expenses recorded on books this year not included on Schedule K, lines 1 through 13d, and 16l (itemize): a Depreciation $ b Travel and entertainment $ 5 Add lines 1 through 4 . . . Schedule M-2 3 4 5 End of tax year (c) Loans from partners (or persons related to partners) Mortgages, notes, bonds payable in 1 year or more 2 1 2 Beginning of tax year (a) (b) Mortgages, notes, bonds payable in less than 1 year Schedule M-1 1 Balance Sheets per Books . . on Schedule K, lines 1 through 11 (itemize): a Tax-exempt interest $ a Deductions included on Schedule K, lines 1 through 13d, and 16l, not charged against book income this year (itemize): Depreciation $ 7 8 9 Add lines 6 and 7 . . . . . . . . Income (loss) (Analysis of Net Income (Loss), line 1). Subtract line 8 from line 5 . 6 Distributions: a Cash . . b Property . Other decreases (itemize): . . . . . . . . Add lines 6 and 7 . . . . . . Analysis of Partners' Capital Accounts Balance at beginning of year . Capital contributed: a Cash . b Property Net income (loss) per books . . Other increases (itemize): Add lines 1 through 4 . . . . . . . . . . . . . . 7 8 9 . . . Balance at end of year. Subtract line 8 from line 5 Form 1065 (2014)