Question

• Complete Anytime Plumbing, LLC’s 2019 partnership tax return (Form 1065 and one Schedule K-1, as they are the same) based upon the facts presented. 

• Ignore all AMT calculations and AMT related reporting items.

• If any information is missing, use reasonable assumptions to fill in the gaps.

• Schedule k1.pdf

• 2019 Form 1065.pdf

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Company Information

Frankie Jones and Wayne Brown decided to form a plumbing company, available 24 hours a day, seven days a week, called Anytime Plumbing, LLC (AP). AP finds itself often as one of the only available choices for middle of the night emergencies and is, therefore, able to charge a premium for after-normal business hour calls. Because of this, and the company’s reputation, the company has been very successful. The AP service area now includes three counties and the company has implemented technology to aid in call dispatch.

Company Information Table

Name of Company	Anytime Plumbing, LLC
Address	904 Fifth Avenue Pittsburgh, PA 15222 (has not changed since inception)
Company Formed and Started	January 1, 2012
Accounting Method	Cash
Tax-year End	December 31
Employer Identification Number	34-9876543

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Members' Information

Frankie Jones
608 Franklin Street
Pittsburgh, PA 15222
SSN- 123-45-6789
Phone: 412-068-1993
Profit/Loss/Capital membership interest is 50%.

Wayne Brown
108 Sugar Hill Drive
Pittsburgh, PA 15222
SSN: 987-65-4321
Phone: 412-195-1018
Profit/Loss/Capital membership interest is 50%.

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Financial Statements

AP Income Statement
For year ending December 31, 2019

Income:
Service Revenue – Cash	$      543,565
Service Revenue – Credit Cards	1,922,710
Consulting Revenue – Cash	100,950
Consulting Revenue – Credit Cards	155,005
Other Income:
Interest Income – Pittsburgh Bank	$            2,540
Municipal Bond Interest Income	3,500
Total Income	$  2,728,270
Expenses:
Employee Salaries	$      515,735
Guaranteed Payment – FJ	60,000
Guaranteed Payment – WB	60,000
Repairs and Maintenance – Trucks	113,415
Rent	35,000
Payroll Taxes	51,260
Licensing Fees	1,750
Property Taxes	77,000
Interest Expense	335,000
Depreciation	759,960
Office Supplies	3,420
Employee Training	15,675
Advertising	20,850
Plumbing Supplies	15,125
Meals (prior to disallowance)	18,740
Travel	4,210
Gasoline	158,675
Utilities	24,940
Telephone	16,830
Total Expenses	$  2,287,585
Net Income	$      440,685

 

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Balance Sheet

	12/31/2018	12/31/2019
Assets:
Cash	$       50,000.00	$       85,000.00
Tax-exempt Securities	115,000.00	115,000.00
Building	4,000,000.00	4,000,000.00
Less: Accumulated Depreciation	(551,282.00)	(653,842.00)
Equipment	2,500,000.00	3,250,000.00
Less: Accumulated Depreciation	(1,481,400.00)	(2,138,800.00)
Land	1,200,000.00	1,200,000.00
Total Assets	$  5,832,318.00	$  5,857,358.00
Liabilities and Capital:
Notes Payable – Pittsburgh Bank	$  4,502,318.00	$  4,196,673.00
Notes Payable – FJ	300,000.00	300,000.00
Notes Payable – WB	200,000.00	200,000.00
Capital Account – FJ	415,000.00	580,342.50
Capital Account – WB	415,000.00	580,342.50
Total Liabilities and Capital	$  5,832,318.00	$  5,857,358.00

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Additional Notes

• AP is not a publicly traded partnership.

• AP is a domestic limited liability company

• AP did not have or control a foreign bank account or have authority over any such financial account.

• AP was not the grantor of or a transferor to a foreign trust.

• AP has never had annual gross receipts in excess of $25,000,000.

• AP has not and did not file a Form 8893 or anything similar to it this year or in the past.

• AP is not required to file a Form 8918.

• AP has never been required to file Form 8858.

• AP was not required to file any Form(s) 5471 during the year.

• AP has never made a Section 754 election.

• AP was required to file Form(s) 1099 related to certain payments it made during the year and those forms were filed on a timely basis.

• AP has never entered a like-kind exchange or distributed a tenancy-in-common or other undivided interest in partnership property.

• AP uses MACRS depreciation for both tax and book purposes.

• AP did not claim Section 179 expense for any of the current year asset additions and has opted out of bonus depreciation for 3 and 5- year recovery period assets.

• The total unadjusted basis for all assets placed in service for the prior 10 years matches the book value of all assets reported on the balance sheet.

• During the year, AP acquired the following assets (all assets were placed in service on the acquisition dates as indicated below):
  

• Service Vans-new (not Luxury Automobiles)    July 1, 2019     $500,000

• Plumbing Machinery/Equipment-new                  July 1, 2019     $250,000

• AP does not maintain any inventory. AP purchases supplies and has a policy of expensing such purchases as paid for tax and book purposes consistent with existing tax law.

• The debt owed to Pittsburgh Bank is a non-recourse obligation and neither Frankie nor Wayne have guaranteed its repayment (see balance sheet). This debt is not directly tied to any specific asset but is rather a debt secured against all of the assets of the company.

• During the year, no debt was cancelled or forgiven in relation to AP.

• All of AP’s activities constitute a qualified trade or business, and the salaries and wages expense represent W-2 wages paid by AP in 2019.
  
  

• Frankie and Wayne are not related.

• Frankie and Wayne are both U.S. citizens.

• Frankie is the Partnership Representative.

• Both Frankie and Wayne are managing members and use the GAAP-basis to track their capital accounts

• Both Frankie and Wayne are active in the business and work full-time for AP.

• During the year, Frankie and Wayne each contributed $20,000 to the capital of AP

• During the year, Frankie and Wayne each received a $75,000 distribution from AP.