BUSINESS

Comprehensive Problem 10-1

Emily Jackson (SocialSECURITY number 765-12-4326) and James Stewart (SocialSECURITY number 466-74-9932) are partners in a partnership that owns and operates a barber shop. The partnership’s first year of operation is 2014. Emily and James divide income and expenses equally. The partnership name is J&S Barbers, it is located at 1023 Broadway, New York, NY 10004, and its Federal ID number is 95-6767676. The 2014 financial statements for the partnership are presented below.

Emily lives at 456 E. 70th Street, New York, NY 10006, and James lives at 436 E. 63rd Street, New York, NY 10012.

Required:

Complete J&S Barbers’ Form 1065 and Emily and James’ Schedule K-1. Do not fill in Schedule D for the capital loss, Form 4562 for depreciation, or Schedule B-1 related to ownership of the partnership. Make realistic assumptions about any missing data. If an amount box does not require an entry or the answer is zero, enter “0”. If required, round your answers to nearest dollar.

Note: If required, enter a “loss” as a negative number on the tax form. Do not enter deductions as negative numbers.


Department of the Treasury Internal Revenue Service
U.S. Return of Partnership Income
For calendar year 2014, or tax year beginning _ _ _ _ , 2014, ending _ _ _ , 20_ _ _ .
► Information about Form 1065 and its separate instructions is atwww.irs.gov/form1065.
OMB No. 1545-0123
A Principal business activity Type or Print Name of partnership D Employer identification number
Barber Service J&S Barbers 95-676767
B Principal product or service Number, street, and room or suite no. If a P.O. box, see the instructions. E Date business started
Barber Service 1023 Broadway 1/01/14
C Business code number City or town, state or province, country, and ZIP or foreign postal code F Total assets (see the instructions)
812111 New York, NY 10004 $
20 Other information
A
I2 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here ▢
J Partner’s share of profit, loss, and capital (see instructions):
Beginning Ending
Profit
20 Other information
A
I2 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here ▢
J Partner’s share of profit, loss, and capital (see instructions):
Beginning Ending
Profit [removed] % [removed] %
Loss [removed] % [removed] %
Capital [removed] % [removed] %
K Partner’s share of liabilities at year end:
Nonrecourse . . . . . . . . . . . . . . . . . . $
Qualified nonrecourse financing . . . . $
Recourse . . . . . . . . . . . . . . . . . . . . . $ [removed]
L Partner’s capital account analysis:
Beginning capital account . . . . . . . . . $ [removed]
Capital contributed during the year $ [removed]
Current year increase (decrease) . . . $ [removed]
Withdrawals & distributions . . . . . . . . $ ( [removed] )
Ending capital account . . . . . . . . . . . . $ [removed]
*See attached statement for additional information.
Tax basis GAAP Section 704(b) book
Other (explain)
M Did the partner contribute property with a built-in gain or loss?
Yes No
If “Yes,” attach statement (see instructions)
For Paperwork Reduction Act Notice, see Instructions for Form 1065. IRS.gov/form1065 Cat. No. 11394R Schedule K-1 (Form 1065) 2014

 

Schedule K-1 (Form 1065) 2014 Page 2
This list identifies the codes used on Schedule K-1 for all partners and provides summarized reporting information for partners who file Form 1040.
For detailed reporting and filing information, see the separate Partner’s Instructions for Schedule K-1 and the instructions for your income tax return.
1. Ordinary business income (loss). Determine whether the income (loss) is passive or nonpassive and enter on your return as follows.
Report on
Passive loss See the Partner’s Instructions
Passive income Schedule E, line 28, column (g)
Nonpassive loss Schedule E, line 28, column (h)
Nonpassive income Schedule E, line 28, column (j)
2. Net rental real estate income (loss) See the Partner’s Instructions
3. Other net rental income (loss)
Net income Schedule E, line 28, column (g)
Net loss See the Partner’s Instructions
4. Guaranteed payments Schedule E, line 28, column (j)
5. Interest income Form 1040, line 8a
6a. Ordinary dividends Form 1040, line 9a
6b. Qualified dividends Form 1040, line 9b
7. Royalties Schedule E, line 4
8. Net short-term capital gain (loss) Schedule D, line 5
9a. Net long-term capital gain (loss) Schedule D, line 12
9b. Collectibles (28%) gain (loss) 28% Rate Gain Worksheet, line 4 (Schedule D instructions)
9c. Unrecaptured section 1250 gain See the Partner’s Instructions
10. Net section 1231 gain (loss) See the Partner’s Instructions
11. Other income (loss)
Code
A Other portfolio income (loss) See the Partner’s Instructions
B Involuntary conversions See the Partner’s Instructions
C Sec. 1256 contracts & straddles Form 6781, line 1
D Mining exploration costs recapture See Pub. 535
E Cancellation of debt Form 1040, line 21 or Form 982
F Other income (loss) See the Partner’s Instructions
12. Section 179 deduction See the Partner’s Instructions
13. Other deductions
A Cash contributions (50%) See the Partner’s Instructions
B Cash contributions (30%)
C Noncash contributions (50%)
D Noncash contributions (30%)
E Capital gain property to a 50% organization (30%)
F Capital gain property (20%)
G Contributions (100%)
H Investment interest expense Form 4952, line 1
I Deductions–royalty income Schedule E, line 19
J Section 59(e)(2) expenditures See the Partner’s Instructions
K Deductions–portfolio (2%FLOOR) Schedule A, line 23
L Deductions–portfolio (other) Schedule A, line 28
M Amounts paid forMEDICAL INSURANCE Schedule A, line 1 or Form 1040, line 29
N Educational assistance benefits See the Partner’s Instructions
O Dependent care benefits Form 2441, line 12
P Preproductive period expenses See the Partner’s Instructions
Q Commercial revitalization deduction from rental real estate activities See Form 8582 instructions
R Pensions and IRAs See the Partner’s Instructions
S Reforestation expense deduction See the Partner’s Instructions
T Domestic production activities information See Form 8903 instructions
U Qualified production activities income Form 8903, line 7b
V Employer’s Form W-2 wages Form 8903, line 17
W Other deductions See the Partner’s Instructions
14. Self-employmentEARNINGS (loss)
Note. If you have a section 179 deduction or any partner-level deductions, See the Partner’s Instructions before completing Schedule SE.
A Net earnings (loss) from self-employment Schedule SE, Section A or B
B Gross farming or fishing income See the Partner’s Instructions
C Gross non-farm income See the Partner’s Instructions
15. Credits
A Low-income housing credit (section 42(j)(5)) from pre-2008 buildings See the Partner’s Instructions
B Low-income housing credit (other) from pre-2008 buildings
C Low-income housing credit (section 42(j)(5)) from post-2007 buildings
D Low-income housing credit (other) from post-2007 buildings
E Qualified rehabilitation expenditures (rental real estate)
F Other rental real estate credits
G Other rental credits
H Undistributed capital gains credit Form 1040, line 73, box a
I Biofuel producer credit See the Partner’s Instructions
J Work opportunity credit
K Disabled access credit

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