Assignment: Tax Return Problem
You can find any forms that you need on the IRS.gov website. You are welcome to use tax software if you have it available to you.
Joe has a one-fourth and Sue a three-fourths interest in a partnership that operates a toy manufacturing company. The partnership files its partnership return on the calendar-year basis. The partnership books disclose the following information for the current calendar year:
Sales $235,000
Returns and allowances 10,000
Opening inventory 50,000
Purchases 50,000
Cost of labor and supplies 105,000
Closing inventory 61,000
Royalties received for use of patent 1,100
Salaries 26,000
Guaranteed payments to partners ($8,400 each) 16,800
Rent paid 17,000
Interest expense on business debt 550
(other than payments to partners)
Taxes 8,500
Bad debt written off 1,000
Repairs 3,000
Depreciation 2,470
Light, postage, stationery, etc. 1,680
Net long-term capital gain 600
Dividends 200
Using Form 1065 and any additional schedules you deem necessary, compute the partnership income and the partners' distributive shares of items that are required to be separately stated (schedule K-1).