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Partnership Tax Return Preparation Problem - Walters?Downs Partnership




Question;Entity TaxationFall 2013Partnership Tax Return Preparation ProblemThe Walters?Downs Partnership was formed 10 years ago as a general partnership totailor women?s clothing. It is located at 2501 N Blackwelder, Oklahoma City,Oklahoma, 73105. Theresa Walters manages the business and has a 40% capital andprofits interest. Her address is 500 Park Place, Edmond, OK 73034. Ann Downs owns the remaining 60% interest, but is not active in the business. Her address is 612 TimberLane, Edmond, OK 73034. The partnership values its inventory using the cost method and has not changed themethod. The partnership uses accrual accounting. The partnership has no foreigninterests and is not a tax shelter nor a publicly traded partnership. There have been nochanges in ownership.The partnership made cash distributions to Walters of $155,050 and to Downs of$232,576 on December 30 of the current year. The partnership?s qualified domesticproduction activities income is $600,000. Financial statements appear below.Prepare a 2012 partnership tax return for Walters?Downs. Note: Include all applicable forms. That is, prepare the 1065 plus all other applicableforms.Income StatementSalesReturnsBeginning Inventory (FIFO) $200,050Purchases 624,000Labor 600,000Supplies 42,000Other costs 12,000Ending Inventory (146,000)Cost of Goods SoldGross ProfitSalaries (other than partners) 51,000Guaranteed payment for Walters 85,000Utilities 46,428Depreciation (MACRS $74,311) 49,782Automobile expense 12,085Office supplies 4,420Advertising 85,000Bad debt expense 2,100Interest expense (all business related) 45,000Rent expense 7,400Travel expense (includes meals $4,050) 11,020Repairs and maintenance 68,300Accounting and legal 3,600Charitable contributions 16,400$2,357,000 (20,000)(1,332,050)$1,004,950Payroll taxes 5,180Other taxes (all business related) 1,400Total expenses 494,115Operating Profit 510,835Other income and lossesGain on sale of AB stock1 18,0002Loss on sale of CD stock (26,075)3Section 1231 gain on land 5,050Interest on US treasury bills 2,000Dividends from 15% owned domestic corporation 11,000 9,975NET INCOME $520,810Balance SheetJanuary 1CashAccounts receivableInventoriesMarketable securitiesBuilding and equipmentAccumulated depreciationLandTotal assetsAccounts payableAccrued salaries payable Payroll taxes payable1December 31$ 10,000$ 40,000 72,600 150,100 200,050 146,000 220,000 260,000 374,600 465,000 (160,484) (173,100) 185,000 240,000$ 901,766 $ 1,128,000$ 35,000 14,000 3,416$ 46,000 18,0007,106 AB stock purchased as investment two years ago on December 1 for $40,000 and soldon June 14 of current year for $58,000.2 CD stock purchased as investment on February 1 of current year for $100,000 and soldon August 1 for $73,925.3 Land was purchased for parking lot. It was purchased 4 years ago on March 17 for$30,000 and sold on August 15 of current year for $35,050.Sales taxes payableNotes payable (current)Long?term debtCapital:WaltersDowns 5,200 44,000 210,0006,560 52,000 275,000 236,060 354,090 289,334 434,000Total liabilities and equity $ 901,766$ 1,128,000


Paper#42671 | Written in 18-Jul-2015

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