Question

Malcolm Fox and Rhonda Ford are equal partners in MFRF LLP, a small business consulting firm. The partners are not related and are both U.S. citizens. Malcolm Fox lives at 415 Knight Court in Freeport, ME, 04469, with a Social Security number of 123-45-6789. Rhonda Ford lives at 123 Main Street in Freeport, ME, 04469, with a Social Security number of 456-12-4561.

The limited liability partnership uses the cash basis and the calendar year, and it began operation on January 1, 2009. The Federal ID for MFRF LLP is 11-1111111 and the current address is 2835 Harbor View Drive, Freeport, ME, 04469 for.

The partnership placed its $65,000 of furniture and fixtures in service on January 1, 2009. This year, it claimed $8,119 of depreciation expense for tax (line 16a and 16c) and financial purposes. No assets were placed in service in the current year.

On Oct. 15, the partnership sold securities, creating a $4,000 long-term capital loss. Please enter this directly onto schedule K; there is not enough information to create the detail.

Net income per books is $200,900. On January 1, 2012, the partners’ capital accounts equal $120,000 each. No additional capital contributions were made in 2012 and each partner made withdrawals of $120,000 during the year.

MFRF LLP Income Statement

Revenues

        Fees collected                             800,000

        Dividend income (all qualified)       3,600

        Taxable business interest              1,400

        Tax-exempt interest                    2,600

        Long-term capital loss                  (4,000)

                Total revenues                    803,600

Expenses

        Accounting fees                           12,000

        Advertising                                 5,000

        Contribution to United Way           2,000

        Depreciation expense                   8,119

        Employee salaries                        340,000

        Guaranteed payments                  140,000

        Entertainment                             2,600

        Travel                                        12,000

        Equipment rental                         6,000

        Office rentals paid                       7,000

        Interest expense                         4,000

        Insurance premiums                    2,200

        Office expense                            20,481

        Payroll taxes                               25,600

        Utilities                                      15,700

                Total expenses                    602,700

MFRF LLP Balance Sheet

Assets                              January 1, 2012        December 31, 2012

Cash                                  $86,576                     $84,595

Tax-exempt securities          52,000                      52,000

Marketable securities           120,000 76,000

Furniture and equipment       65,000                      65,000

Accumulated depreciation     (36,576)                   (44,695)

Total assets                               $287,000                   $232,900

                                        ======                   ======

Liabilities and Equity        January 1, 2012        December 31, 2012

Nonrecourse debt on

Equipment                          $47,000                     $32,000

Capital, Fox                                120,000                     100,450

Capital, Ford                       120,000                     100,450

Total Liabilities and Equity     $287,000                   $232,900

                                        ======                   =======

Prepare Form 1065 and 1065 K-1 for Malcolm Fox only

Answer 1

Form 1065

MFRF LLP

Form 1065 - Page 1

1. Gross Receipts $800,000

8. Total Income $800,000

9. Salaries 340,000

10. Guaranteed Pymts 140,000

13. Rent 13,000

14. Taxes & Licenses 25,600

15 Interest 4,000

16a Depreciation 8,119

20. Other Deductions

Travel 12,000

Advertisement 5,000

Insurance 2,200

Accounting Fees 12,000

Office Expenses 20,481

Utilities 15,700

Total deductions 598,100

Ordinary business income 201,900

Form 1065 - Page 4 Schedule K - Partners Distributive share   

1. Ordinary business income $201,900

4. Guaranteed payments 140,000

5. Interest Income 1,400

6. Dividends 3,600

9a. Long term loss (4,000)

13a Contribution 2,000

18b TE interest 2,600

18c Non-deductible exps 2,600

19a Distribution 240,000

20a Investment income 5,000

Form 1065 - Page 5 - Schedule M-1

1. Net income as per books $200,900

3. Guaranteed payments 140,000

4b Non-deductible portion of Meals 2,600

6. Tax-exempt interest 2,600

9. Income and loss 340,900

Schedule M-2

1. Balance at the beginning of the year 240,000

2. Net income as per books 200,900

6. Distributions (240,000)

9. Balance at end of the year 200,900

Schedule K-1 : Malcom Fox

Form 1065 Schedule K-1

Line 1 Ordinary business income 100,950

4a Guaranteed payments 70,000

5 Interest income 700

6a Dividends 1,800

6b Qualified 1,800

9a Net LT capital loss (2,000)

13a Charitable 1,000

18b Tax exempt interest   1,300

18c Meals 1,300

19A Distribution 120,000

20a Investment Income 2,500