Nick and Paige are equal partners in NP Partnership. The partnership, Nick, and
ID: 2599968 • Letter: N
Question
Nick and Paige are equal partners in NP Partnership. The partnership, Nick, and Paige are calendar year taxpayers.
The partnership incurred the following items in the current year:
Sales $450,000
Cost of goods sold 210,000
Dividends on corporate investments 15,000
Tax-exempt interest income 4,000
Sec. 1245 gain (recapture) on equipment sale 33,000
Sec. 1231 gain on equipment sale 18,000
Long-term capital gain on stock sale 12,000
Long-term capital loss on stock sale 10,000
Short-term capital loss on stock sale 9,000
Depreciation (no Sec. 179 or bonus depreciation components) 27,000
Guaranteed payment to Paige 30,000
Meals and entertainment expenses 11,600
Interest expense on loans allocable to:
Business debt 42,000
Stock investments 9,200
Tax-exempt bonds 2,800
Principal payment on business loan 14,000
Charitable contributions 5,000
Distributions to partners ($40,000 each) 80,000
Compute the partnership’s ordinary income and separately stated items and report the appropriate items on Form 1065 and prepare a Schedule K-1 for Paige.
Compute Nick’s and Paige’s ending basis in their partnership interests assuming their beginning balances are $150,000 each.
Explanation / Answer
Computing the partnership's ordinary Income and separately states items.(Every amount pertains to $)
These things form part of Form 1065 and preparing Schedule K-1 accordingly.
Sales 450,000 Cost of goods sold (210,000) Gross profit on sales 240,000 (Less) Interest - 42000+9200+2800 (54000) principal payment (14000) charitable contributions (5000) guaranteed payments to partners (30000) meals and equipments ( 50% deduction according to the provisions (5800) depreciation (27000) distribution to partners (80000) Book income from operations 24200 Add Dividend income 15000 tax-exempt income 4000 long term gains (33000+18000) 51000 short term gains 12000 (Less) long term loss (10000) short term loss (9000) Net income per books 87200 SEPARATELY STATED ITEMS (deduct) Tax-exempt income (4000) dividend income (15000) long term capital gain (51000) short term capital gain (12000) add long term loss 10000 short term loss 9000 charitable contributions 5000 guaranteed payment 30000 ORDINARY INCOME 59200 *Distribution of partners depends on the various provisions provided - *Depreciation is on the basis of not sec 179 as given in the question if not it's also to mentioned in the separately mentioned items. -Related Questions
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