Reference no: EM131153358

Funky Chicken General Partnership

Income Statement (Per Books)

For Year Ended 12/31/15

Sales Revenue		$               14,000,000
COGS		-8,000,000
Gross Profit		$                 6,000,000
Operating Expenses:
Compensation	$           2,200,000
Depreciation	260,000
Employment Taxes	240,900
Bad Debt Expense	50,000
Interest	129,000
Rent Expense - Building	36,000
Warranty Expense	150,000
Meals & Entertainment	45,000
Repairs & Maintenance	237,000
Fines & Penalties	60,000
Charitable Contributions	300,000
Other Business Expenses	75,000
		(3,782,900)
Other Income (Losses):
Interest Received on State of Nevada Bonds	3,000
Dividends Received from Coca-Cola	9,000
Capital Loss on Abercrombie Stock	(18,000)
Gain on Sale of Equipment	40,000	34,000
Net Income		$                                 -

Additional Information:
1 For tax purposes, Funky Chicken always elects to Section 179 eligible property.
Funky Chicken does not have any Section 179 carryover to use.
For book purposes, Funcky Chicken uses straight-line depreciation.
On August 6, 2015, Funky Chicken purchased $46,000 of new office furniture.
On Sept. 25, 2015, Funky Chicken purchased $64,000 of equipment.
None of the depreciation is allocated to COGS (§263A).

2 Funky Chicken wrote off $40,000 in accounts receivable as uncollectible during the year.

3 Funky Chicken owns < 1% of the outstanding stock of Coca-Cola, Inc.

4 Other Business Expenses includes $2,500 for life insurance premiums on Priscilla Presley and Johnny Counterfeit for which Funky Chicken is the beneficiary.

5 Funky Chicken made cash distributions of $48,000 to Priscilla Presley and $112,000 to Johnny Counterfeit.

6 On July 21, 2015, Funky Chicken sold equipment used in its business for $120,000. It originally purchased the equipment on February 10, 2011 for $150,000.

The book depreciation through the date of sale was $70,000, while the tax depreciation was $150,000.

7 Compensation was paid by Funky Chicken as follows:

8 Interest Expense of $97,000 was incurred for working capital loans, while $32,000 while was incurred on debt used to purchase State of Nevada bonds.

9 Qualified production activities income (QPAI) equals $2,824,100. Employer's wages allocable to U.S. production activities equal $800,000.

10 On September 2, 2015, Funky Chicken sold 1,000 shares of Abercrombie stock for $52 per share. It purchased the Abercrombie stock May 4, 2013 for $70 per share.

11 Warranty expense is estimated as a % of sales. Actual claims and amounts paid on these warranties totaled $130,000.

13 Funky Chicken started business on June 1, 2007 and incurred $48,200 in organizational costs. Funky Chicken made the election to immediately expense $5,000 with the remainder over 180 months.

Prepare a partnership tax return

Requirements:

1 Prepare Pages 1-5 of Form 1065 (and any necessary supporting schedules).
2 Complete a K-1 for Priscilla.
3 Form 4562 for depreciation is not required.
4 Form 4797 is not required.

Attachment:- Funky Chicken Form.xlsx