Ryan Ross (111-11-1111), Oscar Oleander (222-22-2222), Clark Carey (333-33-3333), and Kim Kardigan (444-44-4444) are equal members in ROCK the Ages, LLC.ROCK serves as agents and managers for prominent musicians in the Los Angeles area. The LLCs Federal ID number is 55-5555555. It uses the cash basis and the calendar year and began operations on January 1, 2002. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as Rhiannon and Burgundy 5 and has had a very profitable year. The following information was taken from the LLCs income statement for the current year: Revenues: Fees and commissions $4,800,000 Taxable interest income from bank deposits 1,600 Tax-exempt interest 3,200 Net gain on stock sales 4,000 Total revenues $4,808,800 Expenses: Advertising and public relations $380,000 Charitable contributions 28,000Section 179 expense 20,000 Employee salaries and wages 1,000,000 Guaranteed payment, Ryan Ross, office manager 800,000 Guaranteed payment, other members 600,000Entertainment, subject to 50% disallowance 200,000 Travel 320,000 Legal and accounting fees $132,000 Office rentals paid 80,000 Interest expense on operating line of credit 10,000 Insurance premiums 52,000 Office expense 200,000 Payroll taxes 92,000 Utilities 54,800 Total expenses $3,968,800 During the past couple of 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 remodel with the purchase of $20,000 of office furniture for which it will claim a 179 deduction. (For simplicity, assume that ROCK uses the same cost recovery methods for both tax and financial purposes.) There is no depreciation adjustment for alternative mini-mum tax purposes. ROCK invests much of its excess cash in non-dividend-paying growth stocks and tax-exempt securities. During the year, the LLC sold two securities. On June 15, 2013, ROCK purchased 1,000 shares of Tech, Inc. stock for $100,000; it sold those shares on December 15, 2013, for $80,000. On March 15, 2012, ROCK purchased 2,000 shares of Bio Labs, Inc. stock for $136,000; it sold those shares for $160,000 on December 15, 2013. These transactions were reported to the IRS on Forms 1099 B; ROCKs basis in these shares was reported.Net income per books is $840,000. The firm's activities do not constitute qualified production activities for purposes of the 199 deduction. On January 1, 2013, the members capital accounts equaled $200,000 each. No additional capital contributions were made in 2013. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year. The LLCs balance sheet as of December 31, 2013, is as follows: Beginning Ending Cash $444,000 $Tax-exempt securities 120,000 Marketable securities 436,000 300,000Leasehold improvements, furniture, and equipment 960,000 Accumulated depreciation (960,000) Total assets $1,000,000 $ Operating line of credit $200,000 $160,000 Capital, Ross 200,000 Capital, Oleander 200,000 Capital, Carey 200,000 Capital, Kardigan 200,000 Total liabilities and capital $1,000,000 $Assume that all debt is shared equally by the members. Each member has personally guaranteed the debt of the LLC. The business code for Agents and Managers for Artists, Athletes, Entertainers, and Other Public Figures is 711410. The LLCs Form 1065 was prepared by Ryan Ross and sent to the Ogden, UT IRS Service Center. All members are active in LLC-Operations.
a. Prepare Form 1065, pages 1, 4, and 5, for ROCK the Ages, LLC.
b. If you are using tax return preparation software, prepare Form 4562 and Schedule D.
c. Prepare Schedule K1 for Ryan Ross, 15520 W. Earlson Street, Pacific Palisades, CA 90272?