-Form 1065
-Related statement/schedule and forms
-Form4562
-Form 8949
-schedule D
-Schedule K-1 for all LLC members
-transmittal letter to Ryan Trek that will be transmitted to the partner with their schedule K-1/n Trek Engineering
Financial Statements-Cash Basis
12/31/2023
Consulting Revenues
Interest Income Bank of America
Interest from City of Tustin Bonds
Treasury Note Interest
12,750,000
15,000
35,000
50,000
Net Loss from Sale of Stock
75,500
Capital Gaim Distributions-Long Term
100,000
Ordinary Dividends
75,000
Qualified Dividends
Total Revenue
Guaranteed Payments
25,000
13,125,500
6,000,000
W-2 Wages
2,000,000
Advertising
350,000
Charitable Contributions
96,000
Depreciation **
540,000
Repairs and Maintenance
50,000
Premiums for Life Insurance (Partnership is Beneficiary)
75,000
Interest Expense-Line of Credit
50,000
Guaranteed Payment to Trek for Capital
250,000
Legal and Accounting Fees*
130,000
Meals
225,000
Travel
300,000
Entertainment
350,000
Insurance
Office Rent
Office Expense
52,000
175,000
200,000
Payroll Taxes
150,000
Employee Benefits
125,000
Lobbying Expenses-Congressman George
12,500
Utilities
54,300
Political Contributions
35,000
Total Expenses
11,219,800
Book Income
1,905,700
* Includes $50,000 Legal Fees from a failed acquisition of another engineering company and $20,000 for a failed acquisition of a contruction Co.
** Assume Section 179
Cash
Marketable Securities
Office Equipment
Accumulated Depreciation
Total Assets
Line of Credit
Loan from Wang
Capital Account-Trek
Capital Account-Shatner
Capital Account-Nimoy
Capital Account-Kelly
Total Liabilities and Equity
12/31/2022
1,900,000
500,000
960,000
12/31/2023
TBD
1,250,000
1,500,000
(960,000)
(1,500,000)
2,400,000 TBD
1,000,000
1,000,000
350,000 TBD
350,000 TBD
350,000 TBD
350,000 TBD
2,400,000
TBD/n Practice Set #2 Partnership Tax Return
Ryan Trek (111-11-1112), Bill Shatner (222-22-2223), Lee Nimoy (333-33-3334), and
Dee Kelly (444-44-4445) are equal and unrelated members in Trek Engineering LLC (Trek). Dee
Kelly is NOT an active member in the partnership. He is Trek's friend that invested in the
partnership. He states he is a doctor and not an engineer.
Trek is an engineering services for clients that help clients with energy issues in the Irvine area.
The LLC's Federal ID number is 55-5555556. It uses the cash basis and the calendar year and
began operations on January 1, 2007. Its current address is 2501 Sand Canyon Blvd., Suite 2100,
Irvine, CA 92602. The financial information enclosed from the LLC's income statement for the
current year.
This year, Trek wrapped up its remodel with the purchase of $540,000 of office furniture for
which it will claim a § 179 deduction. (For simplicity, assume that the Company uses the same
cost recovery methods for both tax and financial purposes.) There is no depreciation adjustment
for alternative minimum tax purposes.
Trek invests much of its excess cash in dividend-paying stocks, mutual funds, treasuries, and tax-
exempt securities.
During the year, the LLC several securities transactions. On May 15, purchased 1,000 shares of
Scotty, Inc. stock for $200,000; it sold those shares on December 31 for $165,000. On March 15
of last year, Trek purchased 3,000 shares of Chekov Machinery, Inc. stock for $189,000; it sold
those shares for $299,500 on December 15 of the current year. These transactions were NOT
reported to the IRS on Forms 1099–B; Treks' basis in these shares was reported so form.
Each active member received an equal guaranteed payment for services rendered. Trek received
a guaranteed payment of $250,000 for the additional $2,000,000 of capital invested. He invested
the additional capital in 2023.
Net income per books is $1,905,700. On January 1, the members' capital accounts equaled
$350,000. In addition to their guaranteed payments, each member withdrew $300,000 cash
during the year. All contributions and distributions have been in cash, so the LLC has no net
unrecognized § 704(c) gain or loss. The LLC's balance sheet as of December 31 of this year is
also enclosed.
All debt is shared equally by all members. Each active member has personally guaranteed the
line of credit debt of the LLC. All active members are participating in the Trek operations.
For our purposes, assume that Treks' operations constitute one active trade or business for
purposes of the passive activity and at-risk limitations.
The appropriate business code for the entity is 237310. For the Form 1065, page 5, Analysis of
Net Income, put all partners' allocations in cell 2(b)(ii), per IRS instructions for an LLC. REQUIRED
1) Prepare a 2023 federal Form 1065, pages 1, 4, and 5, for Trek Engineering LLC using
tax basis information for Schedules L and M-2. Use the Intuit Pro connect software
provided to you in Canvas to prepare Form 1065 Forms 4562, 8949, and Schedule D
and any other forms you think are necessary. DO NOT PREPARE THE STATE
TAX RETURNS
2) Prepare Schedule K−1 for all LLC members. Use any address for the partners.
3) You need to prepare an explanation write up on how you treated the items is the facts
above. The explanation is meant to determine if you understand the 1065 assignment.
Please explain how you determined what is taxable, not taxable, deductible, or not
deductible. Use the appropriate authorities to document your conclusions. Also,
provide detail computations of your book/tax differences and computation of taxable
income. Finally, please provide a computation each partner's tax basis (assume the
beginning capital account is the opening tax basis) and document the tax consequences
of all transactions between the members and LLC. If the facts aren't in the case, please
make your own assumptions and document them. Prepare this is in a tax
memorandum format and it should be single-spaced.
4) Prepare a transmittal letter to Ryan Trek that will be transmitted to the partner with
their schedule K-1.
This assignment is worth 100 points
LATE ASSIGNMENTS WILL BE ACCEPTED.
