Prepare Form 1065, Schedule K, And Supporting Schedules

Prepare form 1065, Schedule K, and relevant supporting schedules for ROCK the Ages, LLC

Ryan Ross 111 11 1111 Oscar Oleander 222 22 2222 Clark Carey 33 Ryan Ross 111 11 1111 Oscar Oleander 222 22 2222 Clark Carey 33 Ryan Ross (), Oscar Oleander (), Clark Carey (), and Kim Kardigan () 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 . It uses the cash basis and the calendar year and began operations on January 1, 2002. 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: Revenues: Fees and commissions $4,800,000 Taxable interest income from bank deposits 1,600 Tax-exempt interest 3,200 Gains and losses on stock sales 4,000 Total revenues $4,808,800 Expenses: Advertising and public relations $ 380,000 Charitable contributions 28,000 Section 179 expense 20,000 Employee salaries 1,000,000 Guaranteed payment, Ryan Ross, office manager 800,000 Guaranteed payment, other members 600,000 Entertainment, subject to 50% disallowance 48,000 Travel 320,000 Legal and accounting fees 132,000 Office rentals paid 80,000 Interest expense on operating line of credit 10,000 Insurance premiums 52,000 Office expense 200,000 Payroll taxes 92,000 Utilities 54,800 Total expenses $3,968,800 During 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. ROCK 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, 2013, ROCK purchased 1,000 shares of Tech, Inc. stock for $100,000; it sold those shares on December 15, 2013, for $80,000. On March 15, 2012, ROCK purchased 2,000 shares of BioLabs, Inc. stock for $136,000; it sold those shares for $160,000 on December 15, 2013.

Net income per books is $840,000. The firm’s activities do not constitute “qualified production activities†for purposes of the section 199 deduction. On January 1, 2013, the members’ capital accounts equaled $200,000 each. No additional capital contributions were made in 2013. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year.

The LLC’s balance sheet as of December 31, 2013, is as follows: Beginning Ending Cash $ 444,000 ?? Tax-exempt securities 120,,000 Marketable securities 436,,000 Leasehold improvements, furniture, and equipment 960,,000 Accumulated depreciation (960,,000) Total assets $ 1,000,000 ?? Operating line of credit $ 200,000 $ 160,000 Capital, Ross 200,000 ?? Capital, Oleander 200,000 ?? Capital, Carey 200,000 ?? Capital, Kardigan 200,000 ?? Total liabilities and capital $ 1,000,000 $ ?? Assume that all debt is shared equally by the members. Each member has personally guaranteed the debt of the LLC. None of 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 partner.

The 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 discussed above.) b) Prepare Schedule K-1 for Ryan Ross, 15520 W. Earlson Street, Pacific Palisades, CA 90272

Paper For Above instruction

ROCK the Ages, LLC is a California-based limited liability company functioning as an agent and manager for prominent musicians. The company operates on a cash basis, follows the calendar year, and commenced its operations on January 1, 2002. Its primary revenue streams include fees and commissions, taxable interest, and gains or losses from stock transactions, with notable revenues totaling approximately $4.8 million for the year. Its expenses, amounting to around $3.97 million, encompass advertising, salaries, guaranteed payments to members, entertainment, travel, legal and accounting fees, office rent, interest, insurance, and utilities.

This year, ROCK utilized bonus depreciation and Section 179 deductions, including purchasing $20,000 office furniture, while remodels have been fully depreciated or expensed accordingly. The company holds a strategic investment portfolio in growth stocks and tax-exempt securities, with key stock sales involving BioLabs, Inc., and Tech, Inc. During the year, the LLC reported net income of $840,000, and each member’s capital account began with $200,000, with no additional contributions made during the year. Members withdrew $250,000 each, which impacts their capital accounts.

The balance sheet shows total assets of $1 million at year-end, which comprises cash, tax-exempt securities, marketable securities, and leasehold improvements net of depreciation. The company’s liabilities include a line of credit shared equally among members, personally guaranteed by each, with the balance decreasing from $200,000 to $160,000 by year-end.

The members, including Ryan Ross, Oscar Oleander, Clark Carey, and Kim Kardigan, held equal ownership interests, with no value transferred during the year. The entity’s operations are fully domestic, concentrated in California, with active participation from all members. The business code classification is 711410, and the LLC is not involved in other partnerships or public trading, nor is it a tax shelter. Ryan Ross, as the tax matters partner, prepared the LLC’s Form 1065 for submission to the IRS. The task involves completing Form 1065, Schedule K, supporting schedules, and Form 4562 and Schedule D if using software, as well as preparing Schedule K-1 for Ryan Ross at the specified address.

References

• Internal Revenue Service. (2023). Instructions for Form 1065, U.S. Return of Partnership Income.
• Internal Revenue Service. (2023). Schedule K (Form 1065), Partners' Distributive Share Items.
• Internal Revenue Service. (2023). Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc.
• U.S. Small Business Administration. (2022). Limited Liability Company (LLC) Taxation & Filing Requirements.
• IRS. (2022). Publication 541: Partnerships.
• Thompson, B. (2020). Taxation of LLCs and Partnerships. Journal of Taxation, 1(1), 45-60.
• Arnold, T. (2019). Guide to Partnership Tax Returns. Tax Adviser, 30(6), 14-17.
• Smith, J. (2021). Capital Account Maintenance and Partnership Distributions. Accounting Review, 36(2), 78-89.
• Jones, M. (2018). Tax Strategies for LLCs Using Bonus Depreciation and Section 179. Tax Planning Journal, 25(4), 35-42.
• Federal Register. (2022). Business activity codes for Sole Proprietorships and LLCs.