Reference no: EM132895935

Question - Austin, LLC has properly elected to be taxed as a partnership for Federal Income Tax purposes. Benjamin owns a 20% interest in Austin, LLC, with a basis on January 1, 2020 of $8,000. During the calendar year 2020, Austin, LLC experienced the following income and expenses:

INCOME:

From Operations 1,000,000 captial gain on sale of excess (land not need by business) 20,000

EXPENSES:

Charitable contribution (5,000)

salaries (600,000)

utilities (50,000)

MACRS Depreciation (90,000)

Section 179 (60,000)

(immediate write off from purchase of new delivery van)

NET INCOME 215,000

In addition, total distributions of $100,000 were paid to the partners during the year.

The bookkeeper for Austin, LLC is in the process of preparing the federal tax return for the company for the calendar year 2020 (Form 1065) and consults with you for answers to the following questions:

a) Which items, if any, should be reported as separately stated items on the Form K-1 that will be sent to each partner?

b) Please provide a detailed calculation of Benjamin's year-end basis in his partnership interest?