Scenario 5 - W & M Partnership

Prepare a partnership return and the appropriate K-1s for W & M Partnership.

William Winston (SSN: 226-00-4265) lives at 53 Mantis Road, Your City, Your State - Your Zip. He operates Lovely Lady Beauty Salon at 1096 Lovely Lady Lane, Your City, Your State - Your Zip. Mr. Winston started his business as a sole proprietor. He has discovered that he cannot do it all himself and, with Mary Martin (SSN: 111-99-8989), they formed a partnership. Mary's address is 9478 Ivy Leaf Way, Your City, Your State - Your Zip.

When the partnership was formed on January 15, 2022, William supplied all equipment and inventory, and Mary supplied $5,000 cash for working capital. William and Mary agreed that all future profits and losses would be split equally. William will be the tax matters partner.

The partnership is cash basis and uses calendar year reporting. Its EIN is 35-1224444.

W & M Partnership Financial Information
Item	Amount
Gross sales	$69,327
Advertising	$ 375
Commissions	$ 400
Supplies	$ 685
Business personal property tax	$ 245
Wages (employees)	$14,530
Rentals of business property	$ 7,100
Business insurance premiums	$ 596
License fees	$ 350
Travel expenses	$ 800
Bank charges	$ 789
Phone expenses	$ 894
FUTA/FICA taxes	$ 2,100
Depreciation expenses	$ 602
Section 179 deduction	$ 1,145

Inventory Information
Contributed inventory	$ 2,800
Inventory purchased	$13,940
Ending inventory	$ 2,000

Personal Vehicle Logbook Information
Date placed into service	1/15/2022
Business miles for the tax year	4,240
Commuting miles for the tax year	1,946
Personal miles for the tax year	2,110
Standard mileage rate 1/1-6/30	$0.585
Standard mileage rate 7/1-12/31	$0.625

* Assume mileage was incurred evenly throughout the year.

Mr. Winston purchased the following equipment, all of which was used 100% for business.

Item	Purchase Date	Cost
Office furniture	1/15/22	$1,032
Fixtures	1/15/22	$ 167
Store sign	1/15/22	$ 250
Card reader	1/15/22	$ 458
Display case	1/15/22	$ 225
Telephone	1/15/22	$ 218
Mirrors*	1/15/22	$ 85
Manicure table*	1/15/22	$ 817
Computer	1/15/22	$ 503
Facial chair	1/15/22	$ 487
Adding machine/calculator*	1/15/22	$ 80
Manicure chair*	1/15/22	$ 163
Printer	1/15/22	$ 285

*Mr. Winston wishes to expense these items under section 179.Note:Do not use special depreciation for any of the assets.

What is the adjusted basis for William and for Mary at the time the partnership was formed? Prepare a balance sheet for W & M Partnership as of 12/31/22.

What is the amount of total assets based on the balance sheet at 12/31/2020?

a) $ 3,025 b) $34,120 c) $ 4,770 d) $29,085