PARTNERSHIP TAX RETURN PROJECT CASE INFORMATION – AC312
General Information
August Easter and Grace Jackson own Notorious B.B.Q. (NB), a limited partnership. NB sells a variety of rubs, sauces, and accessories for grilling and smoking meat. NB was formed on August 18, 2019 and operates out of Kansas City, Missouri. August is a general partner, manages the operations of the business, and holds 60% profits, loss, and capital interests. Grace is a limited partner, is as an investor only, and holds the remaining 40% profits, loss, and capital interests.
Following is additional information related to NB:
• Office Location: 543 BBQ Lane, Kansas City, MO 64119
• Employer Identification Number: 99-8888777
• Business activity code: 445290
• August’s address and social security number: 123 Ribs Lane, Kansas City, MO 64158, and his social security number is 123-12-1234.
• Grace’s address is 789 Brisket Ave., Kansas City, MO 64114, and her social security number is 987-98-9876.
• August is the partnership representative, and his phone number is (816) 100-1000.
Financial Information
Following is pertinent information related to NB’s financial activities in 2021:
• NB uses the accrual method of accounting and has a calendar year-end.
• NB owns 5,000 shares of BBQ Holdings, Inc. (BBQ) stock, which represents less than 1% ownership. BBQ is a US (domestic) corporation. BBQ distributed a $2,600 qualified dividend to NB on August 1.
• Of the $1,800 in interest income, $300 was from a Kansas City bond and $1,500 was from a bank account.
• All guaranteed payments were made to August for services provided to the partnership.
• On December 15, 2021, NB distributed $15,000 to August and $10,000 to Grace.
• The charitable contribution made during the year was paid in cash.
• The $5,000 interest expense was related to the notes payable. The note payable is a business loan and is nonrecourse debt. (Note: The debt is NOT qualified nonrecourse financing.)
• Included in the other expenses amount was a property tax penalty in the amount of $540 that was assessed when NB failed to pay its property tax on time.
• The partnership uses the FIFO inventory method and values its inventory at lower of cost or market. In addition, UNICAP rules of §263A do not apply and there was no change in determining quantities, cost, or valuations between opening and closing inventory.
• August, as general partner, is legally responsible for paying NB’s accounts payable if the partnership fails to do so.
• NB did not have any current year fixed asset purchases. In 2019 and 2020, all fixed assets purchased were fully depreciated using bonus depreciation.
• For the purposes of the Qualified Business Income Deduction, the unadjusted basis of qualified property immediately after acquisition is $54,000.
• Assume that NB did not make any payments that would require it to file Form(s) 1099.
Financial Statements
Before starting the project, please note the following:
2021 tax returns will be prepared using 2020 forms/schedules in this course. Due to the timing of this course, the 2021 forms/schedules were not available
yet. For the most part, Form 1120 does not change much from year to year, so this should not present an issue.
Complete only the requested forms/schedules: Form 1065; Download Form 1065;Form 1125-A; Download Form 1125-A;Schedule B-1, Form 1065 Download
Schedule B-1, Form 1065; Schedule K-1, Form 1065 (two required; one for each partner) Download Schedule K-1, Form 1065 (two required; one for each
partner); Form 1065 Supporting Statement; Download Form 1065 Supporting Statement;and Form 1065, Schedule K-1, Line 20 Supporting Statement (two
required; one for each partner) Download Form 1065, Schedule K-1, Line 20 Supporting Statement (two required; one for each partner). If a line of a form or
schedule requests a different form/schedule that is not explicitly required as stated, you do NOT need to complete it.
Certain lines will not need to be populated on the forms/schedules if the taxpayer did not have any activity related to the line.
You are highly encouraged to reference the instructions for the forms. The instructions can be found at the IRS website (irs.gov (Links to an external site.)).
However, once again, due to the fact that the 2021 forms/schedules are unavailable, be aware that some of the numbers/rules in the 2020 instructions may
not be accurately reflected for 2021. Therefore, when in doubt, use the information in your e-textbook as a cross-reference.