Tax Return Problem 9: Partnership Instructions: Please complete AAA Fast Plumbing’s 2019 tax return based upon the facts presented below. If required information is missing, use reasonable assumptions

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Tax Produce Problem 9: Partnership

Instructions:

Please accomplished AAA Fast Plumbing’s 2019 tax produce established upon the cause presented underneath. If required instruction is forfeiture, use culm assumptions to store in the gaps. Ignore all AMT calculations and AMT kindred reporting items.

Michael Rodriguez and Devontae Johnson enjoy been life-long friends. Twain Michael and Devontae instituted to fruit for the identical social plumbing retrieve concourse undeviatingly behind graduating from technical school. Behind almost a decade of fruiting for that identical concourse, Michael and Devontae resolute to stake out on their own and create their own plumbing concourse denominated AAA Fast Plumbing Retrieve (AAA). They createed AAA as a poor impost concourse (LLC). Michael and Devontae each own 50% of the concourse. The concourse has been happy principally established upon symbol and the reality that AAA is conducive 24 hours a day, seven days a week. Although AAA jaw a boon for behind natural vocation hour persuades, most of its competitors obtain not percreate uses departed 9 p.m. and, thus, AAA finds itself frequently as one of the simply conducive choices for average of the extinction emergencies.

AAA has different employees and owing of implementing technology solutions to aid in its persuade execute program, AAA has been effectual to enlarge its use area to now apprehend a three-county area instead of normal one.

Information of to AAA and its owners is as follows:

Name of Company: AAA Fast Plumbing Repair, LLC

Address: 1456 East Buena Vista Blvd.

Los Angeles, CA 90001 (has not modifiable since course)

Company createed and instituted: January 1, 2011

Accounting Method: Cash

Tax-year end: December 31

Employer Identification Number: 34-1234567

Members’ Information:

Michael Rodriguez

1515 West Bloomington Street

Los Angeles, CA 90001

SSN- 585-31-6060 Phone: 555-234-8745

Profit/Loss/Capital denomination cause is 50%.

Devontae Johnson

19 East Violet Circle

Los Angeles, CA 90001

SSN: 397-29-9239 Phone: 555-213-0989

Copyright 2020 McGraw-Hill Education. All hues backwardness. No multitude or classification outside the foregoing written agree of McGraw-Hill Education.

Profit/Loss/Capital denomination cause is 50%.

Other instruction:

• AAA is a private poor impost concourse

• Michael and Devontae are not kindred.

• Michael and Devontae are twain U.S. citizens.

• Twain Michael and Devontae are managing members and use the GAAP-cause to footprint their principal statements

• AAA has never had annual bulk profits in abundance of $25,000,000.

• AAA has not and did not rasp a Create 8893 or anything concordant to it this year or in the departed.

• AAA is not a publicly dealingd union.

• During the year, no vindication was cancelled or forgiven in connection to AAA.

• All of AAA’s activities depute a adapted dealing or vocation, and the salaries and hire price represents W-2 hire compensated by AAA in 2019.

• The entirety unadjusted cause for all goods placed in use for the foregoing 10 years matches the compass rate of all goods reported on the equalize equivocation.

• AAA is not required to rasp a Create 8918.

• AAA did not enjoy or manage a exotic bank statement or enjoy instance adjust any such financial statement.

• AAA was not the grantor of or a transferor to a exotic confidence.

• AAA has never made a Section 754 choice.

• AAA has never entered a like-kind substitute or as sorted a tenancy-in-common or other unimpaired cause in union estate.

• AAA has never been required to rasp Create 8858.

• AAA was required to rasp Form(s) 1099 kindred to sure payments it made during the year and those creates were raspd on a judicious cause.

• AAA was not required to rasp any Form(s) 5471 during the year.

• Michael is the Union Representative.

• Twain Michael and Devontae are free in the vocation and fruit full-time for AAA.

• The vindication attributable to First Social Bank is a non-recourse compulsion and neither Michael nor Devontae enjoy guaranteed its retribution (see equalize equivocation underneath). This vindication is not undeviatingly tied to any unfair asset but is rather a vindication secured over all of the goods of the concourse.

• During the year, Michael and Devontae each contributed $20,000 to the principal of AAA

• AAA does not continue any catalogue. AAA purchases supply and has a prudence of expensing such purchases as compensated for tax and compass purposes compatible after a while strong tax law.

• AAA uses MACRS derogation for twain tax and compass purposes.

• During the year, Michael and Devontae each common a $75,000 classification from AAA.

• During the year, AAA assumed the forthcoming goods (all goods were placed in use on the merit dates as implied underneath):

o Use vans-new (not Luxury Automobiles) July 1, 2019 $500,000

o Plumbing machinery/equipment-new July 1, 2019 $250,000

• AAA did not vindication Section 179 price for any of the floating year asset additions and has opted out of boon derogation for 3 and 5- year retrieval era goods.

Copyright 2020 McGraw-Hill Education. All hues backwardness. No multitude or classification outside the foregoing written agree of McGraw-Hill Education.

Financial Statements:

Balance Sheet

Assets: 12/31/18 12/31/19

Cash $ 30,000 $ 45,000

Tax-exempt Securities 100,000 100,000

Building 4,000,000 4,000,000

Less: Acc. Derogation (551,282) (653,842)

Equipment 2,500,000 3,250,000

Less: Acc. Derogation (1,481,400) (2,138,800

Land 1,000,000 1,000,000

Total Assets: $5,597,318 $5,602,358

Liabilities and Capital:

Note Payable-First Social Bank $4,267,318 $4,046,673

Note Payable-Michael Rodriguez 300,000 300,000

Note Payable-Devontae Johnson 200,000 200,000

Capital Account-MR 415,000 527,842.50

Capital Account-DJ 415,000 527,842.50

Total Liabilities and Capital: $5,597,318 $5,602,358

Copyright 2020 McGraw-Hill Education. All hues backwardness. No multitude or classification outside the foregoing written agree of McGraw-Hill Education.

Income Statement for the year accomplishment December 31, 2019

Item Amount

Income:

Service Revenue-Cash $ 343,565

Service Revenue-Credit Cards $1,922,710

Consulting Revenue-Cash $ 50,950

Consulting Revenue-Credit Cards $ 155,005

Interest Income-First Social Bank $ 1,540

Municipal Bond Cause Income $ 2,500

Total Income: $2,476,270

Expenses:

Employee Salaries $ 515,735

Guaranteed payment-MR $ 50,000

Guaranteed payment-DJ $ 50,000

Repairs and Maintenance-Trucks $ 113,415

Rent $ 35,000

Payroll Taxes $ 41,260

Licensing Fees $ 1,750

Property Taxes $ 77,000

Interest Price $ 235,000

Depreciation $ 759,960

Office Supply $ 3,420

Employee Training $ 5,675

Advertising $ 18,850

Plumbing supply $ 15,125

Meals (foregoing to embargo) $ 13,740

Travel $ 4,210

Gasoline $ 158,675

Utilities $ 24,940

Telephone $ 16,830

Total Expenses: $2,140,585

Net Income: $ 335,685


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