The TimpRiders LP has operated a motorcycle dealership for a number of years. Lance is the limited partner, Francesca is the general partner, and they share capital and profits equally, Francesca works full time managing the partnership. Both the partnership and the partners report on a calendar-year basis. At the start of the current year, Lance and Francesca had bases of $10,000 and $3,000, respectively, and the partnership did not carry any debt. During the current year, the partnership reported the following results from operations: Net sales Cost of goods sold Operating expenses Short-term capital loss Tax-exempt interest $1231 gain $650,000 $500,000 $160,000 $ 2,000 $ 2,000 $ 6,000 On the last day of the year, the partnership distributed $3,000 each to Lance and Francesca. a. What outside basis do Lance and Francesca have in their partnership Interests at the end of the year? b. How much of their losses are currently not deductible by Lance and Francesca because of the tax-basis limitation? c. To what extent does the passive activity loss limitation apply in restricting their deductible losses for the year? (For all the requirements, negative amounts should be entered with a minus sign. Leave no answer blank. Enter zero if applicable.) Lance Francesca a. b Year end basis Loss limited by tax basis Loss limited by passive activity c d. Using the information provided, prepare TimpRiders' page 1 and Schedule K to be included with its Form 1065 for the current year. Also, prepare a Schedule K-1 for Lance and Francesca. (Use 2020 tax rules regardless of year on tax form. Losses should be entered as negative numbers and input all other values as positive numbers) Prepare Form 1065. 1065 PG Schedule Schedule Schedule 1 K1 Ki Lance Form 1065 U.S. Return of Partnership Income OMB No. 1545-0123 Department of the For calendar year 2019, or tax year beginning Treasury 2018, ending 20 2019 Internal Revenue Service Go to www.irs.gov/Form 1065 for instructions and the latest information. A Principal business D Employer identification Name of Partnership activity number TimpRiders, LP B Principal product or Number, street, and room or suite no. Ifa E Date business started service Type or Print P.O. box, see instructions. C Business code City or town, state or province, country F Total assets (see number and ZIP or foreign postal code Instructions) G Check applicable (1) Initial (2) Final (3) Name (5) Amended (4) Address Change boxes: Return Return Change Return H Check accounting (1) Cash method: (2) Accrual (3) Other (specify) 1 Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year J Check if Schedules C and M-3 are attached K Check if partnership: V Aggregated activities for section 465 (2) Grouped activities for section 469 at-risk purposes passive activity purposes Caution: Include only trade or business income and expenses on lines 1a through 22 below. See instructions for more information. 1a Gross receipts or sales la 650,000 b Returns and allowances 1b C Balance. Subtract line 1b from line ta 1c 650,000 2 Cost of goods sold (attach Form 1125-A) 2 500,000 3 Gross profit. Subtract line 2 from line 1c 3 150,000 Income 4 Ordinary incomo (loss) from other partnerships, ostates, and trusts 4 (attach statement) 5 Netfarm profit (loss) (attach Schedule F (Form 1040 or 1040-SR)) 5 6. Net gain (loss) from Form 4797 Part II, line 17 (attach Form 4797) 7 Other Income (loss) (attach statement) 7 8 Total income (loss). Combine lines 3 through 7 8 150,000 9 Salaries and wages (other than to partners) (less employment 9 credits) 10 Guaranteed payments to partners 10 11 Repairs and maintenance 11 12 Bad debts 12 13 Rent 13 Deductions 14 Taxes and licenses 14 (see the 15 Interest (see instructions) 15 Instructions 16a Depreciation (if required, attach Form 16a 4562) Ib Lass depreciation reported on Form 6 SINO Neys HOLB. Pat 7 Other Income (loss) (attach statement) 8 Total income (loss). Combine lines 3 through 7 8 150.000 9 Salaries and wages (other than partners) (less employment 9 credits) 10 Guaranteed payments to partners 10 11 Repairs and maintenance 11 12 Bad debts 12 13 Rent 13 Deductions 14 Taxes and licenses 14 (see the 15 Interest (see Instructions) 15 instructions 16a Depreciation (if required, attach Form 4562) 16a for b Less depreciation reported on Form 1125-A and elsewhere on return 16b 160 limitations) 17 Depletion (Do not deduct oll and gas depletion.) 17 18 Retirement plans, etc. 18 19 Employee benefit programs 19 20 Other deductions (attach statement) 20 160.000 21 Total deductions. Add the amounts shown in the far right column for 21 160,000 lines 9 through 20 22 Ordinary business income (loss). Subtract line 21 from line 8 22 (10,000) 23 Interest due under the look back method completed long-term 23 contracts (attach Form 8697) 24 Interest due under the look back method-income forecast method 24 (attach Form 8866) Tax and 25 BBA AAR imputed underpayment (see Instructions) 25 Payment 26 Other taxes (see instructions) 26 27 Total balance due. Add lines 23 through 26 27 28 Payment (see instructions) 28 29 Amount owed. If line 28 is smaller than line 27, enter amount owed 29 30 Overpayment. If line 28 is larger than line 27, enter overpayment 30 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 partner or limited liability company member) is based on all information of which preparer has any knowledge. Sign May the IRS discuss this return with the Hero preparer shown below? See instructions Signature of partner or limited liability Date Yes NO company member Print/Type preparer's name Preparer's signature Date Check if self- PTIN employed Paid Firm's Preparer name Firm's EIN Use Only Firm's Phone no. address For Paperwork Reduction Act Notice, see separate Cat No. 11390Z Form 1065 (2018) Instructions. THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2020 McGraw-Hill Education, 1005 PO Schedule K > Prepare Form 1065. Page 4 Total amount 1 (10,000) 2 0 4 4c 5 1065 PG Schedule Schedule Schedule 1 K K1 Ki Lance Form 1065 (2019) Schedule K Partners Distributive Share Items 1 Ordinary business income (loss) (pago 1, lino 22) 2 Net rental real estate income (loss) (attach Form 8825) 3a Other gross rental income (oss) 3a b Expenses from other rental activities (attach 3b statement) Other net rental income (loss). Subtract line 3b from line 3a 4 Guaranteed payments: a Services 4a b Capital 4b c Total. Add lines 4a and 4b 5 Interest income income 6 Dividends and dividend a Ordinary (Loss) equivalents: dividends b Qualified 6b dividends c Dividend 6c equivalents 7 Royalties 8 Net short-term capital gain (loss) (attach Schedule D (Form 1065)) sa Net long-term capital gain (loss) (attach Schedule D (Form 1065)) Collectibles (28%) gain (loss) 9b1 c Unrecaptured section 1250 gain (attach statement) 9c 10 Net section 1231 gain (loss) (attach Form 4797) 11 Other income (oss) (see instructions) Type - 12 Section 179 deduction (attach Form 4562) 13a Contributions Deductions b Investment interest expenso c Section 59(e)(2) expenditures: (2) Amount (1) Type d Other deductions (see + instructions) Type 14a Net eamings (loss) from self-employment Self- b b Employment Gross farming or fishing income c Gross nonfarm Income 15a Low-income housing credit (section 420)(5)) b Low-income housing credit (other) Credits Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable) d Other rental real estate credits (see instructions) Type - Other rental credits (see Instructions) Type - Other credits see instructions Type (2.000) 10 6,000 11 12 13a 13b 13c(2) 13d 14a 14b 140 15a 15b 15c C 150 le 15e 1511 C e c Required information [ Ib Employment 14b Gross farming or fishing income Gross nonfarm income 140 15a Low-income housing credit (Section 42025)) 15a b Low-income housing credit (other) 150 Credits Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if 150 applicable) d Other rental real estate credits 150 (see instructions) Type - Other rental credits (see Instructions) 15e Type - Other credits (see instructions) Type 151 16a Name of country or U.S. possession b Gross income from all sources 16b Gross income sourced at partner level 160 Foreign gross income sourced at partnership level d Reserved for 161 future use e Foreign branch category Passive General category h Other (attach category statement). Foreign Deductions allocated and apportioned at partner level Transactions i interest expense Other 16h Deductions allocated and apportioned at partnership level to foreign source income k Reserved for Foreign branch future use category Passive in General o Other (attach 16k category statement) category Total foreign taxes (check Paid Accrued one): 161 9 Reduction in taxes available for credit (attach statement) 16m Other foreign tax information (attach statement) 17a Post-1986 depreciation adjustment 17a Alternative b Adjusted gain or loss 17b Minimum Tax C Depletion (other than oil and gas) 170 (AMT) Items d oll, gas, and geothermal properties-gross income 170 Oil, gas, and geothermal properties-deductions 17e Other AMT items (attach statement) 171 18a Tax-exempt interest income 18a 2.000 bOther tax-exempt income 18b c Nondeductible expenses Other 19a Distributions of cash and marketable securities 19a 0 Information b Distributions of other property + 19b 20a Investment income 20a D Investment expenses 20b Other items and amounts (attach statement) Form 1065 (2018) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2020 McGraw-Hill Education, (1065 PG 1 Schedule K1 Francesca > m e 1 180 C Prepare Form 1065. of 2 1065 PG Schedule Schedule Schedule 1 K1 K1 Lance Schedule K-1 2019 ok Final K-1 Amended OMB No. 1545-0123 Partner's Share of Current Year Part III Income, Doductions, Credits, and other Items Ordinary business Income (loss) 15 Credits (5.000) Net rental real ostato income (loss) 1 + 2 (Form 1065) Department of the For calendar year Treasury 2019, or tax year Internal Revenue Service 2019 beginning ending ,20 Partner's Share of income, Deductions, Credits, etc. See back of form and separate Instructions. + Part 1 Information About the Partnership A Partnership's employer identification number nce 3 Other net rental income 16 Foreign transactions (loss) 4 Guaranteed payments for services Guaranteed payments 4b for capital Partnership's name, address, city, state, and B ZIP code TimpRiders, LP 4c Total guaranteed payments 5 Interest income IRS Center where partnership filed return 6a Ordinary dividends Check if this is a publicly traded partnership (PTP) 6b Qualified dividends 6c Dividend equivalents 17 Alternative minimum tax (AMT) items Part Information About the Partner Partner's SSN OG TIN (Do not use TIN of a disregarded entity. See inst.) E 7 Royalties Net short-term capital gain (loss) F Name, address, city, state, and ZIP code for partner entered in E. See Instructions (1,000) Francesca 9a Net long-term capital gain (loss) G a General partner or Limited partner or other LLC member LLC manager Sb Tax-exempt income 18 and nondeductible expenses H1 Domestic partner Foreign partner 9c Unrecaptured section 1250 gain 1,000 HER HAHNEN Antarth Required information expenses H1 Domestic partner Unrecaptured section Foreign partner 9c 1250 gain 1,000 H2 If the partner is a disregarded entity (DE), enter the partner's TIN Name 10 Net section 1231 gain (loss) 3.000 11 What type of entity is this Partnership 11 Other income (loss) partner? If this partner is a retirement plan 12 19 Distributions (IRA/SEP/Keogh/etc.), check here A Partner's share of profit, loss, and capital J (see Instructions) Beginning Ending 12 Section 179 deduction Profit 50% 50% 20 Other information LOSS 50% 50% 13 Other deductions Z QBL- Capital 50% 50% Check it decrease is due to sale or exchange of partnership Interest K Habilities: Ending Nonrecourse $ Qualified nonrecourse $ Self-employment financing earings (loss) Recourse $ Check this box item includes liability amounts from lower tier partnerships A L Partner's Capital Account Analysis Beginning capital Not account $ Provided 21 More than one activity for at-risk purposes Capital contributed during the $ year Current year net income (loss) []More than one activity for passive activity $ (5.000) 22 purposes Other increase (decrease) (attach $ explanation) Withdrawals & distributions $ 5.000 See attached statement for additional Information. Ending capital account $ For IRS Use Partner's share of Beginning 14 Only Did the partner contribute property with a built-in M gain or loss? Yes No If "Yes," attach statement (see Instructions) Partner's Share of Net Unrecognized Section N 704(c) Gain or (Loss) Beginning $ Ending $ For Paperwork Reduction Act Notice, see Instructions for Form 1065 www.lrs.gov/Form 1065 Cal. No Schedule K-1 Form 11394R 1065) 2019 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL O 2020 McGraw-Hill Education