In The Blanks

Note: This problem is for the 2021 tax year.

Ryan Ross (111-11-1112), Oscar Omega (222-22-2223), Clark Carey (333-33-3334), and Kim Kardigan (444-44-4445) are equal active members in ROCK the Ages LLC. ROCK serves as agent and manager for prominent musicians in the Los Angeles area. The LLC's Federal ID number is 55-5555556. It uses the cash basis and the calendar year and began operations on January 1, 2009. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as Adrianna Venti, Drake Malone, Elena Gomez, Tyler Quick, Queen Bey, and Bruno Mercury and has had a very profitable year. The following information was taken from the LLC's 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	28,000
179 expense	20,000
Employee salaries and wages	1,000,000
Guaranteed payment (services), Ryan Ross, office manager	800,000
Guaranteed payment (services), other members	600,000
Business meals, subject to 50% disallowance	200,000
Business restaurant meals and travel (100% deductible)	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

Recently, 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 minimum 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, 2021, ROCK purchased 1,000 shares of Tech, Inc., stock for $100,000; it sold those shares on December 15, 2021, for $80,000. On March 15, 2020, ROCK purchased 2,000 shares of BioLabs, Inc., stock for $136,000; it sold those shares for $160,000 on December 15, 2021. These transactions were reported to the IRS on Forms 1099-B; ROCK's basis in these shares was reported.

Net income per books is $840,000. On January 1, 2021, the members' tax basis capital accounts equaled $200,000 each. No additional capital contributions were made in 2021. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year. All contributions and distributions have been in cash, so the LLC has no net unrecognized 704(c) gain or loss. The LLC's balance sheet as of December 31, 2021, is as follows.

	Beginning		Ending
Cash	$444,000		$??
Tax-exempt securities	120,000		120,000
Marketable securities	436,000		300,000
Leasehold improvements, furniture, and equipment	960,000		980,000
Accumulated depreciation	(960,000)		(980,000)
Total assets	$1,000,000		$??
Operating line of credit	$200,000		$160,000
Capital, Ross	200,000		??
Capital, Omega	200,000		??
Capital, Carey	200,000		??
Capital, Kardigan	200,000		??
Total liabilities and capital	$1,000,000		$??

The firm's activities do not constitute "qualified production activities" for purposes of the 199 deduction. (Note that the 179 deduction is a business-related expense.) The LLC's UBIA (unadjusted basis immediately after acquisition) equals the total original cost of all leasehold improvements, or $980,000.

All debt is shared equally by the members. Each member has personally guaranteed the debt of the LLC. All members are active in LLC operations. The business code for the entity is 711410.

F Total assets =

G

Check applicable boxes:

(1)

Initial return

(2)

Final return

(3)

Name change

(4)

Address change

(5)

Amended return

H

Check accounting method:

(1)

Cash

(2)

Accrual

(3)

Other (specify)

I

Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year

4

J

Check if Schedules C and M-3 are attached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Caution: Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information.

INCOME	1a	Gross receipts or sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1a	in the blank
	b	Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1b
	c	Balance. Subtract line 1b from line 1a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1c	in the blank
	2	Cost of goods sold (attach Form 1125-A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			2
	3	Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			3	in the blank
	4	Ordinary income (loss) from other partnerships, estates, and trusts (attach statement) . . . . . . . . . . . .			4
	5	Net farm profit (loss) (attach Schedule F (Form 1040)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			5
	6	Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . . . . . . . . . . . . . . . . . . . .			6
	7	Other income (loss) (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			7
	8	Total income (loss). Combine lines 3 through 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			8	in the blank
DEDUCTIONS SEE INSTRS FOR LIMITATIONS	9	Salaries and wages (other than to partners) (less employment credits) . . . . . . . . . . . . . . . . . . . . . . . .			9	in the blank
	10	Guaranteed payments to partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			10	in the blank
	11	Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			11
	12	Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			12
	13	Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			13	in the blank
	14	Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			14	in the blank
	15	Interest (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			15	in the blank
	16a	Depreciation (if required, attach Form 4562) . . . . . . . . . . . . . . . . . . . . . .	16a
	b	Less depreciation reported on Form 1125-A and elsewhere on return . . . . .	16b		16c
	17	Depletion (Do not deduct oil and gas depletion.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			17
	18	Retirement plans, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			18
	19	Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			19
	20	Other deductions (att stmt) See Statement 1			20	in the blank
	21	Total deductions. Add the amounts shown in the far right column for lines 9 through 20 . . . . . . . . . .			21	in the blank
	22	Ordinary business income (loss). Subtract line 21 from line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . .			22	in the blank
TAX AND PAYMENTS	23	Interest due under the look-back method completed long-term contracts (attach Form 8697) . . . . . .			23
	24	Interest due under the look-back method income forecast method (attach Form 8866) . . . . . . . . . . .			24
	25	BBA AAR imputed underpayment (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			25
	26	Other taxes (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			26
	27	Total balance due. Add lines 23 through 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			27
	28	Payment (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			28
	29	Amount owed. If line 28 is smaller than line 27, enter amount owed . . . . . . . . . . . . . . . . . . . . . . . .			29
	30	Overpayment. If line 28 is larger than line 27, enter overpayment . . . . . . . . . . . . . . . . . . . . . . . . . .			30