Ryan Ross (111-11-1112), Oscar Omega (222-22-2222), Clark Carey (333-33-3333). and Kim Kardigan (444 44 4444) are equal active members in ROCK the Ages 11.C. ROCK serves as agent and manager for prominent musicians in the Los Angeles area. The LLC’s Federal ID number is 55-5555555. It uses the cash basis and a calendar tax year, and it began operations on January 1, 2004. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036.
ROCK was the force behind such music icons as Rhiannon, Burgundy Six, Elena Gomez, Tyler Quick, Queen Bey, and Bruno Mercury, and it has had a very profitable year. The following information was taken from the LLC’s income statement for the current year.
During the past few years, ROCK has taken advantage of bonus depreciation and § 179 deductions and fully remodeled the premises and upgraded its leasehold improvements. This year, ROCK wrapped up its remodeling with the purchase of $20,000 of office furniture, for which it will claim a § 179 deduction. 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 and tax-exempt securities. During the year, the LLC sold two securities. On June 15, ROCK purchased 1,000 shares of Tech, Inc. stock for $100,000; it sold those shares on December 15, for $80,000. On March 15 of last year, ROCK purchased 2,000 shares of BioLabs, Inc. stock for $136,000; it sold those shares for $160,000 on December 15 of the current year. These transactions were reported to the IRS on Forms 1099- B; ROCK’s basis in these shares was reported on the form.
Net income per books for the current year is $840,000. On January 1, the members’ capital accounts equaled $200,000 each. No additional capital contributions were made during the year. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year.
ROCK’s book as of December 31 of this year is as follows.
All debt is shared equally by the members. Each member has personally guaranteed the debt of the LLC. All of the owners are active in ROCK’s operations.
The appropriate business code for the entity is 711410. For the Form 1065 page 5 Analysis of Net Income, put all amounts in cell 2(b)(ii). The LLC’s Form Io65 was prepared by Ryan Ross and sent to the Ogden, UT, IRS Service Center.
a. Prepare pages 1, 4, and 5 of a Form 1065 for ROCK the Ages LLC. Use tax-basis data in completing Schedules L and M-2. Include any information the LLC members might need including information for § 199A calculation. Use 2018 tax rules. If available use 2018 tax forms.
b. If you are using tax return preparation software, prepare Form 4562 and Schedule D.
c. Prepare Schedule K-1 for Ryan Ross, 15520 W. Earlson Street, Pacific Palisades, CA 90272.