Form 1065
Response to the following problem:
On January 3, 2014, Ellen Elvers (SSN 299-84-1945) and Jack Ford form Elvers and Ford general partnership (EIN 31-0960341). Elvers and Ford operate a business that sells various types of merchandise (business code 5963) at 1425 Tyron Street, Charlotte, North Carolina 28201. To form the partnership, Ellen contributes $24,000; Jack contributes $16,000. The agreement provides that Ellen will participate in the partnership on a full-time basis and Jack on a part-time basis. The agreement further provides that Ellen and Jack will receive guaranteed annual payments of $34,000 and $18,000, respectively. The remaining profits go 60% to Ellen and 40% to Jack.
Prepare Form 1065 and Schedule K-1 (Form 1065) for Ellen Elvers. Ellen is the Designated Tax Matters Partner. Her address is 1609 Amber Way, Charlotte, NC 28201. Ellen signs the partnership return on April 10, 2015. The partnership tax return will be filed with the IRS Center in Cincinnati, Ohio. Although the partnership is not required to complete Schedules L, M-1, M-2, or Item F on Form 1065 , complete these items for Elvers and Ford partnership. The trial balance that follows was prepared as of December 31 after all necessary adjustments. Merchandise inventory is an exception. Total purchases of inventory during the year were $162,700. The ending balance in inventory was $22,000. Also, the partners' capital accounts do not reflect the partners' distributive shares of income and loss for the year. The accounts for the partners' "Drawings" represent withdrawals in addition to their respective guaranteed payments. Net income per books (Schedule M-1, line 1) is $23,990. The partnership uses the accrual method of accounting. Worthless accounts totaling to $800 were written off directly to bad debt expense during the year. The partnership calculates depreciation using (accelerated) MACRS. The equipment was the only personal property purchased during 2014. The partnership does not elect Section 179. Book depreciation is reported on the trial balance. Book depreciation is based on a different method than MACRS. Charitable contributions are subject to the 50% limitation. On October 3, 2014, 50 shares of common stock in ZMT Corporation were sold for $2,900. The stock was purchased for $1,700 on March 29, 2014. For purposes of preparing Form 1065, assume that Form 4562 and Schedule D have been properly prepared.