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

Tax Recur Problem 9: Partnership


Please adequate AAA Fast Plumbing’s 2019 tax recur naturalized upon the axioms presented beneath. If required knowledge is mislaying, use sedate assumptions to replenish in the gaps. Ignore all AMT calculations and AMT kindred reporting items.

Michael Rodriguez and Devontae Johnson own been life-long friends. Twain Michael and Devontae established to fruit for the selfselfcorresponding common plumbing restore order forthafter a while succeeding graduating from technical academy. Succeeding closely a decade of fruiting for that selfselfcorresponding order, Michael and Devontae unwavering to luck out on their own and form their own plumbing order designated AAA Fast Plumbing Restore (AAA). They formed AAA as a scant necessity order (LLC). Michael and Devontae each own 50% of the order. The order has been auspicious principally naturalized upon order and the deed that AAA is suited 24 hours a day, seven days a week. Although AAA mandible a bribe for succeeding typical employment hour wheedles, most of its competitors conciliate not perform employments gone-by 9 p.m. and, thus, AAA finds itself frequently as one of the singly suited choices for average of the confusion emergencies.

AAA has sundry employees and accordingly of implementing technology solutions to aid in its wheedle accelerate program, AAA has been effectual to develop its employment area to now embrace a three-county area instead of proper 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 radical late fife)

Company formed and established: 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 conjunction share 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 bashful. No multitude or classification outside the former written submit of McGraw-Hill Education.

Profit/Loss/Capital conjunction share is 50%.

Other knowledge:

• AAA is a domiciliary scant necessity order

• 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-foundation to course their excellent recitals

• AAA has never had annual impure profits in extravagance of $25,000,000.

• AAA has not and did not rasp a Form 8893 or everything correspondent to it this year or in the gone-by.

• AAA is not a publicly trafficd connection.

• During the year, no necessity was cancelled or forgiven in kindred to AAA.

• All of AAA’s activities form a suitable traffic or employment, and the salaries and allowance expenditure represents W-2 allowance remunerated by AAA in 2019.

• The sum unadjusted foundation for all proceeds placed in employment for the former 10 years matches the bulk estimate of all proceeds reported on the poise quibble.

• AAA is not required to rasp a Form 8918.

• AAA did not own or repress a strange bank recital or own antecedent aggravate any such financial recital.

• AAA was not the grantor of or a transferor to a strange faith.

• AAA has never made a Section 754 choice.

• AAA has never entered a like-kind diversify or nice a tenancy-in-common or other complete share in connection characteristic.

• AAA has never been required to rasp Form 8858.

• AAA was required to rasp Form(s) 1099 kindred to real payments it made during the year and those forms were raspd on a early foundation.

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

• Michael is the Connection Representative.

• Twain Michael and Devontae are erratic in the employment and fruit full-time for AAA.

• The necessity owed to First Common Bank is a non-recourse necessity and neither Michael nor Devontae own guaranteed its retribution (see poise quibble beneath). This necessity is not immediately tied to any particular asset but is rather a necessity trustworthy across all of the proceeds of the order.

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

• AAA does not celebrate any catalogue. AAA purchases food and has a device of expensing such purchases as remunerated for tax and bulk purposes accordant after a while tangible tax law.

• AAA uses MACRS slander for twain tax and bulk purposes.

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

• During the year, AAA adscititious the forthcoming proceeds (all proceeds were placed in employment on the compensation dates as indicated beneath):

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

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

• AAA did not right Section 179 expenditure for any of the popular year asset additions and has opted out of boon slander for 3 and 5- year regaining duration proceeds.

Copyright 2020 McGraw-Hill Education. All hues bashful. No multitude or classification outside the former written submit 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. Slander (551,282) (653,842)

Equipment 2,500,000 3,250,000

Less: Acc. Slander (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 Common 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 bashful. No multitude or classification outside the former written submit of McGraw-Hill Education.

Income Statement for the year ending December 31, 2019

Item Amount


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 Common Bank $ 1,540

Municipal Bond Share Income $ 2,500

Total Income: $2,476,270


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 Expenditure $ 235,000

Depreciation $ 759,960

Office Food $ 3,420

Employee Training $ 5,675

Advertising $ 18,850

Plumbing food $ 15,125

Meals (former to inhibition) $ 13,740

Travel $ 4,210

Gasoline $ 158,675

Utilities $ 24,940

Telephone $ 16,830

Total Expenses: $2,140,585

Net Income: $ 335,685