Problem 21-37 (Algorithmic) (LO. 6, 7, 8, 9, 10, 11) Amy and Mitchell share equally (50%) in the profits, losses, and capital of the accrual basis AM Products LLC. Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's tax basis capital account has a balance of $544,000, and the LLC has debts of $353,600 payable to unrelated parties. All debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $816,000 W-2 wages 200,000 Depreciation expense 300,000 Interest income 8,160 Long-term capital loss 5,440 Long-term capital gain 16,320 Charitable contribution (cash) 8,210 Cash distribution to Amy 40,800 Unadjusted basis of partnership property 1,600,000 immediately after acquisition * Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $247,520. Assume that all transactions are reflected in Amy's beginning capital and basis in the same manner. Also, assume that all AM Products' activities are eligible for the qualified business income deduction. a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point. LLC interest at the beginning of the year: $ 720,800 LLC interest at the end of the year: $ 222,615 XSchedule K-1 Part III Partner's Share of Current Year Income, 2022 [ Form 1065] Deductions, Credits, and Other Items Department of the Treasury For calendar year 2022, or las your 1 Ordinary Business income Internal Revenue Service A beginning / 2022 ending 2 Net rental real estate income Partner's Share of Income, Deductions, Credits, etc. Son separate instructions. Part I Information About the Partnership 3 Other net rental income (loss] 15 Credits Partnership's employer identification number 40 Guaranteed payments for Partnership's name, address, city, state, and ZIP code 46 Guaranteed payments for 16 Schedule K-3 is attached if AM Products, LLC capital chickial . . . . . 185 Center where partnership fled return: 4e Total guaranteed paymerits 17 Allernative minimum Lax Check if this is a publicly traded partnership (PTP) [AMT) itama Part II Information About the Partner 5 Interest income Partner's SEN or TIN (Do not use TIN of a disregarded entity. Sea instructions.) Ba Ordinary dividends Name, address, city, state, and ZIP code for partner entered in E. 6b Qualified dividends 18 Tax-eximpl incorre arid Ste instructions. nondeductible asperises Be Dividend equivalents I General partner or LLC member- O Limited partner or other LLC manager member Hi D Damistic partner O Fondign partrian H2 0 If the partner is a disregarded onlily (DE), enter the partner's: B Met short-term capital quir TIN Name 9a Net long-term capital gain 19 Distributions Ii What type of entity is this partnert 12 If this partner is a retirement plan (IICASEPyRoughyetc. ], check Collectibles (28%%] gain (loss] har lover's share of profit, loss, and capital (one instructions]: De Unrecaptured section 1250 20 Other information Beginning Ending quin 2% STMT QBI Capital HE 10 Nel section 1231 gain [Jams] Chack if decrease is due to sale or exchange of partnership 11 Other income (loss) W-2 wagth intentsl O LIBIA Partner's share of habilities: Beginning Ending 12 Section 179 deduction 21 Foreign Laxis paid ur 13 Other deductions linamong $ Chack this bax if Them K includes ability amounts from lower-lier partnerships E 22 0 More than one activity for at-risk purposes* Partner's capital account analysis: 23 o More than one activity for passive activity purposes* Beginning capital account . . . . . . "See allached statement for additional information. Capital contributed during the year. . Current year net income (loss) . . . . . Other increase (decrease] fallach explanation Withdrawals and distributions . . Ending capital account . or IRB Use Only M Did the partner coritribute property with a built-in gain (loss]Fb. What income, gains, losses, and deductions does Amy report on her income tax return? If an amount is zero, enter "0". Ordinary income 408,000 X Net long-term capital gain 5,440 Interest income 4,080 Charitable contribution deduction 4,105 Cash distribution 40,800 Xc. Based on the information provided, what other calculations is Amy required to make? Amy may be eligible to deduct up to % % of the ordinary income as qualified business income under 1994 and will make that calculation on her return. This deduction does not * ov require a cash outflow by Amy or the LLC, and it does not ~ ww affect her basis or capital account. 4s someone treated as a general partner, Amy's distributive share of the LLC's ordinary business income is * W subject to self-employment tax and possibly the additional Medicare tax. Her ordinary income * XK from the LLC may be subject to the additional tax under 1411. d. Prepare Amy's tax basis capital account roll forward from the beginning to the end of the tax year. How does her ending capital account differ from her ending tax basis in the LLC interest as calculated in part (a)? Capital account balance, beginning ' year Ordinary income $| 408,000 x Interest income wv Net long-term capital gain Wf Less: Charitable contribution $ 4,105| v Cash distribution to Amy 40,800) Capital account balance, end of {id year Amy's capital account differs from her basis only by the amount of her share of LLC 7