Problem
Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $106,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $74,000 and was appraised at $180,000. The land was also encumbered with a $74,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $6,300 principal payment on the mortgage. For the first year of operations, partnership records disclosed the following information:
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Sales revenue
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$ 500,000
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Cost of goods sold
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450,000
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Operating expenses
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60,000
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Long-term capital gains
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1,500
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§1231 gains
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900
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Charitable contributions
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300
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Municipal bond interest
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300
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Salary paid as a guaranteed payment to Deanne (not included in expenses)
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3,000
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Prepare a Schedule K-1 for Deanne.
Visit the IRS website and download Form 1065 Schedule K-1. Enter the required values in the appropriate fields. Save your completed Tax Form to your computer and then upload it here by clicking "Browse." Next, click "Save."