Note: This problem is for the 2022 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, 2010. 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, 2022, ROCK purchased 1,000 shares of Tech, Inc., stock for $100,000; it sold those shares on December 15, 2022, for $80,000. On March 15, 2021, ROCK purchased 2,000 shares of BioLabs, Inc., stock for $136,000; it sold those shares for $160,000 on December 15, 2022. 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, 2022, the members' tax basis capital accounts equaled $200,000 each. No additional capital contributions were made in 2022. 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, 2022, 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. Complete the 2022 Form 1065 for ROCK the Ages LLC with appropriate forms and schedules. Prepare Schedule K-1 for Ryan Ross.

• If an amount box does not require an entry or the answer is zero, enter "0".
• Enter all amounts as positive numbers, unless otherwise instructed.
• If required, round amounts to the nearest dollar.
• Make realistic assumptions about any missing data.

Form 1065 ScheduleTIT ACCUIICINIQUIVII VI IIICUINIC (LUSS) PCI DOORS WILL ATIOIYSIS UI INCL IIICOINIC (LOSS) PEI ACLUITI Note: The partnership may be required to file Schedule M-3. See instructions. Net income (loss) (see instructions) . . . . . 6 Income recorded on books this year not 1 840,000 included on Schedule K, lines 1 through 11 (itemize): 2 Income included on Schedule K, lines 1, 2, 3c, 5, 6a, 7, 8, 9a, 10, and 11, not a Tax-exempt interest . . recorded on books this year (itemize): $ 3,200 3,200 7 Deductions included on Schedule K, lines 1 3 Guaranteed payments (other than health 1,400,000 through 13d, and 21, not charged against insurance) . . book income this year (itemize): 4 Expenses recorded on books this year not a Depreciation $ included on Schedule K, lines 1 through 13d, and 21 (itemize): a Depreciation . . . $. 8 Add lines 6 and 7 . . . . . . . . 3,200 b Travel and entertainment 100,000 V Income (loss) (Analysis of Net Income $ 100,000 9 (Loss), 5 Add lines 1 through 4 . . 2,340,000 line 1). Subtract line 8 from line 5 . . . . . 2,336,800 Schedule M-2 Analysis of Partners' Capital Accounts 1 Balance at beginning of year . . 800,000 V 6 Distributions: a Cash . . . . . 1,000,000 2 Capital contributed: a Cash . . . .. b Property . . b Property . . . . . . 7 Other decreases (itemize): 3 Net income (loss) per books . . . . . . 840,000 X 4 Other increases (itemize): _ Statement 7 1,000,000 Statement 6 840,000 X 8 Add lines 6 and 7 . . . . . 1,000,000 X Balance at end of year. Subtract line 8 from 5 Add lines 1 through 4 . . . . 1,640,000 X 9 5 640,000schedule K-1 K Partner's share of liabilities: Beginning Ending 12 Section 179 deduction 21 Foreign taxes paid or 5,000 v accrued Nonrecourse $ 50,000| | 50,000 | X ' Qualified 13 Other deductions A 7,000 | nonrecourse financing Recourse $ $ 0 Check this box if Item K includes liability amounts from lower tier partnerships. 22 0 More than one activity for at-risk purposes* 23 More than one activity for passive activity purposes* Partner's capital account analysis: oo. . *See attached statement for additional information. Beginning capital account 200,000 Capital contributed during the year.... $ Current year net income (loss)...... $ 210,000 Other increase (decrease) (attach explanation) See Attached $ 250,000 Withdrawals and distributions 250,000 Ending capital account 160,000 Did the partner contribute property with a built-in gain or loss? For IRS Use Only Oo Yes # No If "Yes," attach statement. See instructions. Partner's Share of Net Unrecognized Section 704(c) Gain or (Loss) BAA For Paperwork Reduction Act Notice, see Instructions for Form 1065.) www.irs.gov/Formi065 Schedule K-1 (Form 1065) 2022 Schedule K-1 Schedule K-1 (Form 1065) 2022 Supplemental Information Page 2 Item L Partner's Capital Account Analysis Other Increase (Decrease) Other Increase 210,000 | X $ 200,000 | X Tax-Exempt Interest and/or Tax-Exempt Other Income Other Decrease Guaranteed Payments (other than health insurance) Non-Deductible Expenses Net Total $ 160,000 | X Box 20, Code N Business Interest Expense Included as a Deduction on the Following Line(s) Below is deductible business interest expense for inclusion in the separate loss class for computing any basis limitation (defined in section 704(d), Regulation section 1.163(j)-6(h)). Schedule K-41, line 1... 2... eee , id Statement A-QBI Pass-through Entity Reporting Complete Statement A-QBI Pass-through Entity Reporting (Schedule K-1, Box 20, Code Z) for ROCK the Ages LLC. Statement A-QBI Pass-through Entity Reporting (Schedule K-1, Box 20, Code Z) Partnership's name: ROCK the Ages LLC Partnership's EIN: 55-5555556 Partner's name: Ryan Ross Partner's identifying number: 111-11-1112 ROCK the Ages LLC O PTP O PTP O PTP O Aggregated Aggregated O Aggregated Partner's share of: O SSTB O SSTB O SSTB QBI or qualified PTP items subject to partner-specific determinations: Ordinary business income (loss) Rental income (loss) . . . . . . . . Royalty income (loss) . . . . . . . . Section 1231 gain (loss) . . . . . Other income (loss). . . . . Section 179 deduction. . . . . . . . Other deductions See Att W-2 wages . . . . . . . . UBIA of qualified property. . . . . . . . Qualified REIT dividendsQBI Statement Information Complete QBI Statement Information for ROCK the Ages LLC. 2022 QBI Statement Information Page 1 Rock the Ages LLC 55-5555556 QBI Statement A Other Deductions Business Name or Address: . . . . . . . . . . ROCK the Ages LLC Charitable Contribution . TotalForm 4562 Prepare Form 4562 for ROCK the Ages LLC. The threshold cost of Section 179 property for 2022 is $2,700,000 and the maximum deduction is $1,080,000. OMB No. 1545-0172 Form 4562 Depreciation and Amortization (Including Information on Listed Property) 2022 Department of the Treasury Attach to your tax return. Attachment Internal Revenue Service Go to www.irs.gov/Form4562 for instructions and the latest information. Sequence No. 179 Name(s) shown on return Identifying number ROCK the Ages LLC 55-5555556 Business or activity to which this form relates Form 1065 Part I Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part I. 1 Maximum amount (see instructions) . . . .. 500,000 X 2 Total cost of section 179 property placed in service (see instructions) . 2 20,000 3 Threshold cost of section 179 property before reduction in limitation (see instructions) . 3 . . . . . . . 2,000,000 X Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- . . 4 O V 5 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married filing separately, see instructions . . 5 O X (b) Cost (business use 6 (a) Description of property (c) Elected cost only) Office Furniture 20,000 V 20,000 V 7 Listed property. Enter the amount from line 29 . . V 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 . . . . . . . . 8 20,000Form 4562 5 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married filing separately, see instructions . . . . 5 0 X (b) Cost (business use (a) Description of property (c) Elected cost only) Office Furniture 20,000 V 20,000 V 7 Listed property. Enter the amount from line 29 . . . . ... O V 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 . . . . . 8 20,000 9 Tentative deduction. Enter the smaller of line 5 or line 8 . . . . g 20,000 10 Carryover of disallowed deduction from line 13 of your 2021 Form 4562 . .. 10 0 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5. See instrs . . . 11 500,000 X 12 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 . . . . . 12 20,000 V 13 Carryover of disallowed deduction to 2023. Add lines 9 and 10, less line 12 . 13 0 Note: Don't use Part II or Part III below for listed property. Instead, use Part V. Part II Special Depreciation Allowance and Other Depreciation (Don't include listed property. See instructions.) 14 Special depreciation allowance for qualified property (other than listed property) placed in service during the tax year. See instructions . . 14 15 Property subject to section 168(f) (1) election . 15 16 Other depreciation (including ACRS) . . . . . . . . . . . 16 Part III MACRS Depreciation (Don't include listed property. See instructions.) Section A 17 MACRS deductions for assets placed in service in tax years beginning before 2022 . . . . . 17 18 If you are electing to group any assets placed in service during the tax year into one or more general asset accounts, check here . . . . 0Federal Statements Complete Federal Statements for ROCK the Ages LLC. 2022 Federal Statements Page 1 Rock the Ages LLC 55-5555556 Statement 1 Form 1065, Line 20 Other Deductions Advertising . . 380,000 Insurance . . 52,000 Legal and Accounting . 132,000 . . . Meals . . . . 100,000 Office Expense . . 200,000 Travel . . . 320,000 Utilities . . 54,800 Total $ 1,238,800Federal Statements Form 1065, Schedule K, Line 13a Charitable Contributions Cash Contributions - 60% Limitation . . 28,000 Total 28,000 Statement 3 Form 1065, Schedule K, Line 20c Other Reportable Items Business Interest Expense (Informational Only for Basis Limitations) Included as a Deduction on the Following Lines(s) Schedule K, line 1 . . . 28,000 X Statement 4 Form 1065, Schedule L, Line 6 Other Current AssetsFederal Statements Statement 4 Form 1065, Schedule L, Line 6 Other Current Assets Marketable Securities Statement 5 Form 1065, Schedule L, Line 17 Other Current Liabilities Line of Credit Beginning 5 436,000| g 436,000| Beginning $ 200,000 | 4 200,000 | v Ending $ 300,000| $ 300,000| Ending $ 160,000| $ 160,000| 2022 Federal Statements Page 2 Rock the Ages LLC 55-5555556 Statement 6 Form 1065, Schedule M-2, Line 4 Other Increases Tax-Exempt Interest and/or Tax-Exempt Other Income . . . 0 X Total 0 X Statement 7 Form 1065, Schedule M-2, Line 7 Other Decreases Guaranteed Payments (other than health insurance) . . . . . 0 X Non-Deductible Expenses . . . . . 1,000,000 X Total 0 XSchedule K-1 X Prepare Schedule K-1 for Ryan Ross, 15520 W. Earlson Street, Pacific Palisades, CA 90272. If required, use the minus sign to indicate a loss. 651121 O Final K-1 0 Amended K-1 OMB No. 1545-0123 Schedule K-1 Part III Partner's Share of Current Year Income, 2022 (Form 1065) Deductions, Credits, and Other Items Department of the Treasury 1 For calendar year 2022, or tax year Ordinary business income 14 Self-employment earnings Internal Revenue Service (loss) A (loss) beginning / 2022 ending 1 244,800 V 1,044,800 2 Net rental real estate income Partner's Share of Income, Deductions, Credits, etc. (loss) See separate instructions. C O X Part I Information About the Partnership 3 Other net rental income (loss) 15 Credits A Partnership's employer identification number 55-5555556 4a Guaranteed payments for services B Partnership's name, address, city, state, and ZIP code 800,000 ROCK the Ages LLC 6102 Wilshire Boulevard Suite 2100 4b Guaranteed payments for 16 Schedule K-3 is attached if Los Angeles, CA 90036 capital checked . . . . . . . . . X C IRS Center where partnership filed return: e-file 4c Total guaranteed payments 17 Alternative minimum tax D O Check if this is a publicly traded partnership (PTP) 800,000 (AMT) items Part II Information About the Partner 5 Interest income E Partner's SSN or TIN (Do not use TIN of a disregarded entity. See 400 instructions.) 111-11-1112 6a Ordinary dividends F Name, address, city, state, and ZIP code for partner entered in E. 6b Qualified dividends 18 Tax-exempt income andSchedule K-1 X 15520 West Earlson Street Pacific Palisades, CA 90272 6c Dividend equivalents A 800 G General partner or LLC member- O Limited partner or other LLC 7 Royalties manager member C 25,000 H1 X Domestic partner O Foreign partner 8 Net short-term capital gain H2 0 If the partner is a disregarded entity (DE), enter the partner's: (loss) TIN Name -5,000 V Il What type of entity is this partner? Individual V 9a Net long-term capital gain 19 Distributions A 12 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check (loss) 250,000 here . .. . . . 0 6,000 V J Partner's share of profit, loss, and capital (see instructions): 9b Collectibles (28%) gain (loss) Beginning Ending 9c Unrecaptured section 1250 20 Other information Profit 25 25 gain A 400 V Loss 25 % 25 V% 10 Net section 1231 gain (loss) Capital 25 0/ 25 V% N* STMT Check if decrease is due to sale or exchange of partnership 11 Other income (loss) interest O Z* STMT K Partner's share of liabilities: Beginning Ending 12 Section 179 deduction 21 Foreign taxes paid or 5,000 accrued Nonrecourse $ 50,000 to 50,000 X 13 Other deductions Qualified A nonrecourse $ 7,000 financing Recourse $ $ O Check this box if Item K includes liability amounts from lower