THIS IS ALL MY PROFESSOR GAVE ME. IT'S A PROJECT BY FILLING OUT THE TAX FORMS PROVIDED BY THE IRS.

Buckeye Co. Partnership Project

Required:

Using the facts given for Buckeye Co.s 2017 operations:

1) Submit: completed (by hand) tax workpapers (provided on pages 5 and 6 of this document).** If you would prefer, you may copy the tax workpapers into an Excel spreadsheet and use Excel for your supporting calculations (e.g. depreciation). If you choose to do this, print and submit the workpapers in hard copy, and email me the file containing your spreadsheet.

2) Submit: completed (by hand) 2017 Form 1065 for Buckeye Partnership (because 2017 forms are only in draft form at this time, you may use 2016 forms available from IRS but apply tax law in its present form applicable to 2017). I do not provide a complete Balance Sheet for Buckeye Co., so you do not have to complete Schedule L on Form 1065. You should complete the following forms:

a. Form 1065

b. Form 4562

c. Form 4797

d. Schedule D (Form 1065)

e. Schedule K-1 (Form 1065) for Mary Jones (you do not have to complete a K-1 for Joe Riley).

** Make a copy of the tax workpapers that you can keep for yourself and use for the Corporation

Project. The corporation project will use very similar facts to those presented here, so many of the calculations you will complete for this partnership project will also apply to the corporation project. If you do not keep a copy of your workpapers, you will have to duplicate many calculations. You may consult your text, IRS website, etc. for questions regarding tax treatment and how to complete the forms. If any facts are unclear, see me for clarification. Round all computations to the nearest dollar.

Complete all tax forms by hand i.e., paper and pencil.

FACTS:

The current year is 2017. Last year, Mary Jones (S.S. 123-45-6789) and Joe Riley (987-65-4321) formed Buckeye Co. partnership. The specific date on which the partners finalized their partnership agreement was January 2, 2016. The company is engaged in the manufacturing of custom athletic products. Buckeye has a calendar year and is located at 987 Columbus Blvd., Meyer OH 43210. Buckeyes employer identification number is 11-1234567, its business activity code is 2222. Buckeyes formation qualified as a nontaxable exchange under 721. Mary and Joes contributions were as follows:

Mary Jones: contributed $50,000 cash and personal property. Mary had purchased the personal property in 2013 at a cost of $10,000; the property had a fair market value of $9,000 on the date of transfer (Jan 2, 2016). The property is MACRS 5-year class life property.

In exchange for the assets contributed, Mary received 60% ownership interest in Buckeye.

Joe Riley: contributed $15,000 cash and personal property. Joe had purchased the property in 2015 Joe at a cost of $20,000; the property had a fair market value of $24,000 on the date of transfer (Jan 2, 2016). The property is MACRS 7-year class life property.

In exchange for the assets contributed, Joe received 40% ownership interest in Buckeye.

The information on the following pages comes from either Buckeye Co.s auditors, the companys own prior-year tax records, or from Mary or Joe personally.

GAAP Financial Accounting Income Statement

For year ended 12/31/2017

Net Sales Revenue $3,300,000

Less: Cost of Goods Sold 1,300,000

Gross Profit 2,000,000

Other income/(loss):

Interest income (note a) 15,000

Net gain/(loss) on sale of marketable securities (note b) (5,000)

Dividends from domestic corporations (note c) 7,000

Net loss on sale of business property (note e) (565,000)

Other income/(loss) (548,000)

Total Income 1,452,000

Operating expenses:

Wages 410,000

Guaranteed payments (note i) 145,000

Repairs and maintenance expense 44,000

Depreciation (note d) 60,000

Business meals and entertainment (note f) 18,000

Taxes 60,000

Interest expense 40,000

Life insurance premium on Mary and Joe (note g) 5,000

Penalty for violating disposal ordinance 15,000

Storm and fire insurance on building and facilities 20,000

Utilities 50,000

Office supplies 25,000

Charitable contributions (note h) 30,000

Selling expenses 90,000

Total operating expenses 1,012,000

Net Income $440,000

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Notes:

(a) Total interest income includes $4,000 of interest from tax-exempt municipal bonds.

(b) Buckeye sold marketable securities during the year. All stock trades were executed through a stockbroker (all stocks are publicly traded). The broker reported both sale proceeds and stock basis to the IRS on Form 1099.

Stock Date Acquired Date Sold Tax Basis Net Sales Price

200 shares Facebook 2/12/17 9/25/17 $16,000 $12,000

300 shares Apple 4/6/17 8/2/17 $ 3,000 $ 7,000

100 shares Coke 5/15/17 9/6/17 $ 6,000 $ 2,000

300 shares IBM 6/14/17 10/7/17 $ 2,000 $ 1,000

(c) The dividends are qualified dividends from domestic based companies. Buckeye owns less than one percent of each of the dividend-paying companies.

(d) Asset-by-asset detail of depreciation recorded for book purposes is not presently available for your review, but Buckeye Co.s auditors have confirmed that the total book depreciation for all of the above assets is $60,000 for 2017. Buckeye has not yet calculated tax depreciation and requests that you do so. Last year, Buckeye elected Section 179 and claimed Bonus Depreciation, to the extent allowed under tax law. Buckeye would like to do the same again this year in order to maximize its tax cost recovery deduction. In addition to the personal property contributed by Mary and Joe on January 2, 2016, Buckeye has purchased and placed

in service the following assets:

Real Property: non-residential building, acquired April 2, 2016. The total purchase price for the building and land was $500,000. The appraisal obtained at the time of purchase indicated that 20% of the total value was attributable to the land and 80% attributable to the building.

Personal Property: ABC, purchased at a cost of $900,000 and placed in service March 30, 2016.

Personal Property: XYZ, purchased at a cost of $710,000 and placed in service May 1, 2017.

Property Date placed in service 2017 Tax Cost Recovery Deductions

Property Mary contributed 1/2/16

Property Joe contributed 1/2/16

Property ABC (7 yr property) 3/30/16

Building 4/2/16

Land 4/2/16

Property XYZ (5 yr property) 5/1/17

Notes:

(e) Buckeye had disastrous results with the ABC property it acquired on March 30, 2016. The Companydecided to sell the ABC property during 2017, replacing it with the XYZ property acquired May 1, 2017. The company also sold the property that Mary had contributed upon formation of the partnership. The computation of the gains and losses for financial accounting purposes are presented in the table below. Buckeye requests that you calculate the appropriate taxable gain/(loss) on the sale of assets, if it differs from that shown below. For information on asset acquisition dates, costs, depreciable lives, etc., see note (d) and the initial facts given on page one that describe the partnerships formation on 1/2/16.

Asset Date Sold Sales Proceeds Net Book Value Gain (Loss) Per Books

Property that Mary contributed 5/12/17 $11,000 $8,000 $ 3,000

Property ABC 12/16/17 $146,000 $714,000 ($568,000)

Total $157,000 $722,000 ($565,000)

(f) Buckeye maintains appropriate contemporaneous records substantiating the business purpose of the meals and entertainment expenditures.

(g) The $5,000 premiums paid are for two life insurance policies) for which Buckeye Co. is the beneficiary. Mary and Joe are each insured. In the event that Mary or Joe dies, Buckeye Co. will use the life insurance policy proceeds to finance purchase of the deceased partners ownership in the company.

(h) The charitable contribution deduction recorded in the financial statements includes the following contributed assets (all organizations are qualifying charities):

Organization Property Date Acquired Date of Contribution Cost Basis Fair Market Value

United Way Cash 12/15/17 $3,000 $ 3,000

Stanford University Stock 3/5/16 06/09/17 $10,000 $41,000

Church Inventory various throughout 2016 01/05/17 $17,000 $26,000

Total $30,000 $70,000

(i) Guaranteed payments to Mary totaled $80,000 over the course of the year. Guaranteed payments to Joe totaled $65,000 over the course of the year.

(j)Cash Distributions: On December 31, 2017, Buckeye Co. distributed $50,000 (in total) to the partners.

(k)Partnership Debt: In order to finance the acquisition of business property and other business operations, Buckeye Co. has significant debt outstanding. On January 1, 2017, Buckeyes liabilities totaled $800,000 ($700,000 nonrecourse debt, $60,000 Marys recourse debt, $40,000 Joes recourse debt). On December 31, 2017, Buckeyes liabilities totaled $1,000,000 ($900,000 nonrecourse debt, $60,000 Marys recourse debt, $40,000 Joes recourse debt).

__________________________

Property Date placed in service 2017 Tax Cost Recovery

Property Mary contributed 1/2/16

Property Joe contributed 1/2/16

Property ABC (7 yr property) 3/30/16

Building 4/2/16

Land 4/2/16

Property XYZ (5 yr property) 5/1/17

Asset Sold Date Sold Net Sales Proceeds 2017 Tax Gain/(Loss)

Property Mary contributed 1/2/16 5/12/17 $11,000

Property ABC 12/16/17 $146,000

Book Income (Expense) Book/Tax Differences Taxable Amounts Ordinary Income/(Loss) Separately Stated

Net Sales Revenue 3,300,000

Cost of Goods Sold (1,300,000)

Interest income (note a) 15,000

Net gain/(loss) on sale of

marketable securities (note b) (5,000)

Dividends from domestic

corporations (note c) 7,000

Net loss on sale of business

property (note e) (565,000)

Wages (410,000)

Guaranteed payments (note i) (145,000)

Repairs and maintenance

expense (44,000)

Depreciation (note d) (60,000)

Business meals and

entertainment (note f) (18,000)

Taxes (60,000)

Interest expense (40,000)

Life insurance premium on

Mary and Joe (note g) (5,000)

Penalty for violating disposal

ordinance (15,000)

Storm and fire insurance on

building and facilities (20,000)

Utilities (50,000)

Office supplies (25,000)

Charitable contributions (note

h) (30,000)

Selling expenses (90,000)

Net Income 440,000