Reference no: EM132648187
Problem - Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current year, Amy's capital account has a balance of $300,000, and the LLC has debts of $200,000 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records.
Ordinary income $900,000
W-2 wages to employees 200,000
Depreciation expense 300,000
Interest income 4,000
Long-term capital loss 6,000
Long-term capital gain 12,000
Charitable contribution (cash) 4,000
Cash distribution to Amy 20,000
Unadjusted basis of partnership depreciable property 1,600,000
Year-end LLC debt payable to unrelated parties is $140,000. Assume all transactions are reflected in her beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction and that the unadjusted basis of assets immediately after acquisition was $800,000.
Required -
a. Use Microsoft Excel to calculate Amy's basis in her LLC interest at the beginning and end of the tax year.
b. What income, gains, losses, and deductions does Amy report on her income tax return?
c. Based on the information provided, what other calculations is Amy required to make?
d. Use Microsoft Excel to prepare Amy's tax-basis capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending basis as calculated in part (a)?
e. Using the information from parts (a), (b), (c), and (d), prepare Amy's Schedule K-1 as if you were the preparer of AM Products LLC's tax return. Provide all information that Amy needs to the extent you can. For Parts I and II (items A to F), omit any missing information (e.g., last names, addresses, EINs, etc.).
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