f. List the separate items of partnership income, gains, losses, deductions, and other items that will be included in each member's Schedule K-1 for the first year of operations. Use the proposed self-employment tax regulations to determine each member's self- employment income or loss.
f. List the separate items of partnership income, gains, losses, deductions, and other items that will be included in each member's Schedule K-1 for the first year of operations. Use the proposed self-employment tax regulations to determine each member's self- employment income or loss.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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LeBron, Dennis, and Susan formed the Bar T LLC at the beginning of the current year. LeBron and Dennis each
contributed $200,000 and Susan transferred several acres of agricultural land she had purchased two years earlier to the
LLC. The land had a tax basis of $50,000 and was appraised at $300,000. The land was also encumbered with a
$100,000 nonrecourse mortgage (i.e., qualified nonrecourse financing) for which no one was personally liable. The
members plan to use the land and cash to begin a cattle-feeding operation. Susan will work full time operating the
business, but LeBron and Dennis will devote less than two days per year to the operation.
All three members agree to split profits and losses equally. At the end of the first year, Bar T had accumulated $40,000 of
accounts payable jointly guaranteed by LeBron and Dennis and had made a $9,000 principal payment on the mortgage.
None of the members have passive income from other sources or business income from other sources. LeBron and
Dennis are married, while Susan is single.
For the first year of operations, the partnership records disclosed the following information:
Sales revenue
Cost of goods sold
Operating expenses
Dividends
Municipal bond interest
Salary paid as a guaranteed payment to
Susan (not included in expenses)
Cash distributions split equally among
the members at year-end
$ 620,000
$ 380,000
$ 670,000
$ 1,200
$
300
$ 10,000
$ 3,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1d72098e-f97d-4ea0-8435-511265d0100e%2F577e3983-bb62-4f2f-adcf-db96a8b83587%2Fs24wufe_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
LeBron, Dennis, and Susan formed the Bar T LLC at the beginning of the current year. LeBron and Dennis each
contributed $200,000 and Susan transferred several acres of agricultural land she had purchased two years earlier to the
LLC. The land had a tax basis of $50,000 and was appraised at $300,000. The land was also encumbered with a
$100,000 nonrecourse mortgage (i.e., qualified nonrecourse financing) for which no one was personally liable. The
members plan to use the land and cash to begin a cattle-feeding operation. Susan will work full time operating the
business, but LeBron and Dennis will devote less than two days per year to the operation.
All three members agree to split profits and losses equally. At the end of the first year, Bar T had accumulated $40,000 of
accounts payable jointly guaranteed by LeBron and Dennis and had made a $9,000 principal payment on the mortgage.
None of the members have passive income from other sources or business income from other sources. LeBron and
Dennis are married, while Susan is single.
For the first year of operations, the partnership records disclosed the following information:
Sales revenue
Cost of goods sold
Operating expenses
Dividends
Municipal bond interest
Salary paid as a guaranteed payment to
Susan (not included in expenses)
Cash distributions split equally among
the members at year-end
$ 620,000
$ 380,000
$ 670,000
$ 1,200
$
300
$ 10,000
$ 3,000
Transcribed Image Text:f. List the separate items of partnership income, gains, losses, deductions, and other items that will be included in each member's
Schedule K-1 for the first year of operations. Use the proposed self-employment tax regulations to determine each member's self-
employment income or loss.
Description
(1)
Dividends
(2) Municipal bond interest
(3)
Guaranteed payments
(4)
Ordinary business income (loss)
(5) Self-employment income (loss)
(6)
Distributions
Total
1,200
300
10,000
(440,000)
LeBron
400
100
0
(146,667)
Dennis
400
100
0
(146,667)
Susan
400
100
10,000
(146,667)
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