I need solution to this problem ASAP -
Ryan Ross (111-11-1111), Oscar Oleander (222-22-2222), Clark
Carey (333-33-3333), and Kim Kardigan (444-44-4444) are equal members in ROCK
the ages, LLC. ROCK serves as agents and managers for prominent musicians in
the Los Angeles area. The LLC’s Federal ID number is 55-5555555. It uses the
cash basis and the calendar year and began operations on January 1, 2000. Its
current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036.
ROCK was the force behind such music icons as Rhiannon and Ulster and has had a
very profitable year. The following information was taken from the LLC’s income
statement for the current year:
income from bank deposits 1,600
Gains and losses
on stock sales 4,000
public relations $ 420,000
payment, Ryan Ross, office manager
payment, other members 900,000
subject to 50% disallowance
on operating line of credit 6,000
the past couple of years, ROCK has taken advantage of bonus depreciation and
section 179 deductions and fully remodeled the premises and upgraded its
leasehold improvements. This year, ROCK wrapped up its remodel with the
purchase of $20,000 of office furniture for which it will claim a section 179
deduction. (For simplicity, assume that ROCK uses the same cost recovery
methods for both tax and financial purposes.) There is no depreciation
adjustment for alternative minimum tax purposes.
invests much of its excess cash in non-dividend-paying growth stocks, and
tax-exempt securities. During the year, the LLC sold two securities. On June
15, 2011, ROCK purchased 1,000 shares of Tech, Inc. stock for $72,000; it sold
those shares on December 15, 2011, for $60,000. On March 15, 2005, ROCK
purchased 2,000 shares of BioLabs, Inc. stock for $104,000; it sold those
shares for $120,000 on December 15, 2011.
income per books is $1,108,800. The firm’s activities do not constitute
“qualified production activities” for purposes of the section 199 deduction. On
January 1, 2011, the members’ capital accounts equaled $160,000 each. No
additional capital contributions were made in 2011. In addition to their
guaranteed payments, each member withdrew $240,000 cash during the year. The
LLC’s balance sheet as of December 31, 2011, is as follows:
$ 340,000 ??
Leasehold improvements, furniture, and equipment 820,000 840,000
Accumulated depreciation (820,000) (840,000)
assets $ 840,000 ??
Operating line of credit
$ 200,000 $ 160,000
Capital, Kardigan 160,000 ??
liabilities and capital
$ 840,000 $ ??
that all debt is shared equally by the members. Each member has personally
guaranteed the debt of the LLC.
the members, all of whom are U.S. citizens, sold any portion of their interests
in ROCK during the year. All of the entity’s financial operations are
concentrated in California. The LLC had no foreign bank accounts or operations
and no interest in any U.S. or foreign trusts, corporations, or partnerships.
The LLC is not publicly traded and is not a statutory tax shelter. The LLC is
not subject to consolidated audit procedures. Ryan Ross is the tax matters
business code for “Agents and Managers for Artists, Athletes, Entertainers, and
Other Public Figures” is 711410. ROCK is not a partner in any other
partnership. The LLC’s form 1065 was prepared by Ryan Ross and sent to the Ogden,
UT IRS Service Center. All members are active in LLC operations.
a) Prepare form 1065, Schedule K, and relevant supporting
schedules for ROCK the Ages, LLC, leaving blank any items where insufficient
information has been provided. If you are using tax return preparation
software, also prepare Form 4562 and Schedule D. (Note: You can assume that the
answer to each “yes/no” question on Form 1065, page 3 is “no” unless otherwise
b) Prepare Schedule K-1 for Ryan Ross, 15520 W. Earlson Street,
Pacific Palisades, CA 90272