INSTRUCTIONS

Please use the information below to complete the Form 1065 and the Schedule K-1 using the information below. Blank forms can be found on the IRS site on the Hands On Exercise page. Please feel free to use a tax software package if you have one. Form required to be completed include: Form 1065 Page 1, Schedule B, Schedule K, Schedule L, and Schedule K-1s

GENERAL COMPANY INFORMATION

Malcolm Fox and Rhonda Ford are equal partners in MFRF LLP, a small business consulting firm. The partners are not related and are both U.S. citizens. Malcolm Fox lives at 415 Knight Court in Freeport, ME, 04469, with a Social Security number of 123-45-6789. Rhonda Ford lives at 123 Main Street in Freeport, ME, 04469, with a Social Security number of 456-12-4561.

The limited liability partnership uses the cash basis and the calendar year, and it began operation on January 1, 2009. The Federal ID for MFRF LLP is 11-1111111 and the current address is 2835 Harbor View Drive, Freeport, ME, 04469.

The partnership placed its $65,000 of furniture and fixtures in service on January 1, 2009. This year, it claimed $8,119 of depreciation expense for tax (line 16a and 16c) and financial purposes. No assets were placed in service in the current year.

On Oct. 15, the partnership sold securities, creating a $4,000 long-term capital loss. Please enter this directly onto schedule K; there is not enough information to create the detail.

Net income per books is $200,900. On January 1, 2012, the partners capital accounts equal $120,000 each. No additional capital contributions were made in 2012 and each partner made withdrawals of $120,000 during the year.

MFRF LLP Income Statement

Revenues

Fees collected 800,000

Dividend income (all qualified) 3,600

Taxable business interest 1,400

Tax-exempt interest 2,600

Long-term capital loss (4,000)

Total revenues 803,600

Expenses

Accounting fees 12,000

Advertising 5,000

Contribution to United Way 2,000

Depreciation expense 8,119

Employee salaries 340,000

Guaranteed payments 140,000

Entertainment 2,600

Travel 12,000

Equipment rental 6,000

Office rentals paid 7,000

Interest expense 4,000

Insurance premiums 2,200

Office expense 20,481

Payroll taxes 25,600

Utilities 15,700

Total expenses 602,700

MFRF LLP Balance Sheet

Assets January 1, 2016 December 31, 2016

Cash $86,576 $84,595

Tax-exempt securities 52,000 52,000

Marketable securities 120,000 76,000

Furniture and equipment 65,000 65,000

Accumulated depreciation (36,576) (44,695)

Total assets $287,000 $232,900

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Liabilities and Equity January 1, 2016 December 31, 2016

Nonrecourse debt on

Equipment $47,000 $32,000

Capital, Fox 120,000 100,450

Capital, Ford 120,000 100,450

Total Liabilities and Equity $287,000 $232,900

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