Homework Help is Here – Start Your Trial Now!
Business
Accounting
Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $692,000, and the LLC has debts of $449,800 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $1,038,000 w-2 wages 200,000 Depreciation expense 300,000 Interest income 10,380 Long-term capital loss 6,920 Long-term capital gain 20,760 Charitable contribution (cash) 10,430 Cash distribution to Amy 51,900 Unadjusted basis of partnership depreciable property immediately after acquisition 1,600,000 Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $314,860. Assume that all transactions are reflected in Amy's beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction. a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point. LLC interest at the beginning of the year: LLC interest at the end of the year: $ b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income Net long-term capital gain Interest income Charitable contribution deduction Cash distribution

Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $692,000, and the LLC has debts of $449,800 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $1,038,000 w-2 wages 200,000 Depreciation expense 300,000 Interest income 10,380 Long-term capital loss 6,920 Long-term capital gain 20,760 Charitable contribution (cash) 10,430 Cash distribution to Amy 51,900 Unadjusted basis of partnership depreciable property immediately after acquisition 1,600,000 Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $314,860. Assume that all transactions are reflected in Amy's beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction. a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point. LLC interest at the beginning of the year: LLC interest at the end of the year: $ b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income Net long-term capital gain Interest income Charitable contribution deduction Cash distribution

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

Please, look at the two images attached.

b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income Net long-term capital gain Interest income Charitable contribution deduction Cash distribution c. Based on the information provided, what other calculations is Amy required to make? Amy may be eligible to deduct up to % of the ordinary income as qualified business income under 5 199A, and will make that calculation on her return. This deduction require a cash outflow by Amy or the LLC, and it affect her basis or capital account. As someone treated as a general partner, Amy's distributive share of the LLC's ordinary business income from the LLC may subject to self-employment tax and possibly the additional Medicare tax. Her be subject to the additional tax under 5 1411. d. Prepare Amy's tax basis capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending tax basis in the LLC interest as calculated in part (a)? Capital account balance, beginning year Ordinary income Interest income Net long-term capital gain Less: Charitable contribution Cash distribution to Amy Capital account balance, end of year Amy's capital account differs from her basis only by the amount of her share of LLC
Transcribed Image Text:b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income Net long-term capital gain Interest income Charitable contribution deduction Cash distribution c. Based on the information provided, what other calculations is Amy required to make? Amy may be eligible to deduct up to % of the ordinary income as qualified business income under 5 199A, and will make that calculation on her return. This deduction require a cash outflow by Amy or the LLC, and it affect her basis or capital account. As someone treated as a general partner, Amy's distributive share of the LLC's ordinary business income from the LLC may subject to self-employment tax and possibly the additional Medicare tax. Her be subject to the additional tax under 5 1411. d. Prepare Amy's tax basis capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending tax basis in the LLC interest as calculated in part (a)? Capital account balance, beginning year Ordinary income Interest income Net long-term capital gain Less: Charitable contribution Cash distribution to Amy Capital account balance, end of year Amy's capital account differs from her basis only by the amount of her share of LLC
Problem 14-16 (Algorithmic) (LO. 4, 5, 7) Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $692,000, and the LLC has debts of $449,800 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $1,038,000 W-2 wages 200,000 Depreciation expense 300,000 Interest income 10,380 Long-term capital loss 6,920 Long-term capital gain 20,760 Charitable contribution (cash) 10,430 Cash distribution to Amy 51,900 Unadjusted basis of partnership depreciable property immediately after 1,600,000 acquisition Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $314,860. Assume that all transactions are reflected in Amy's beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction. a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point. Xe: LLC interest at the beginning of the year: LLC interest at the end of the year: $ b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income Net long-term capital gain Interest income Charitable contribution deduction Cash distribution
Transcribed Image Text:Problem 14-16 (Algorithmic) (LO. 4, 5, 7) Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $692,000, and the LLC has debts of $449,800 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $1,038,000 W-2 wages 200,000 Depreciation expense 300,000 Interest income 10,380 Long-term capital loss 6,920 Long-term capital gain 20,760 Charitable contribution (cash) 10,430 Cash distribution to Amy 51,900 Unadjusted basis of partnership depreciable property immediately after 1,600,000 acquisition Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $314,860. Assume that all transactions are reflected in Amy's beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction. a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point. Xe: LLC interest at the beginning of the year: LLC interest at the end of the year: $ b. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income Net long-term capital gain Interest income Charitable contribution deduction Cash distribution
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Database design
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS