The project is for Serenity by Jan Partnership. Serenity by Jan is a booming candle company. The two owners of the company, Michael Scott and Jan Levinson, are excited to have you doing their taxes. Kevin would like you to prepare the Partnership Tax Return, Form 1065. He would also like you to prepare the following supplementary schedules and forms: Schedule D (Form 1065), Form 1125-A, Form 4797, and the K-1 for Michael Scott and the K-1 for Jan Levinson. Attach any additional detail from the schedules listed where necessary on an additional sheet of paper.

Kevin gave you Serenity by Jan’s Balance Sheet and Income Statement for 2022. He also provided you with the following facts:

• Serenity by Jan Partnership is located at 1234 Urkel Grue Road, Scranton, PA 12345
• Jan Levinson manages the business and she has a 40% capital and profits interest.
  • Jan’s address is 1234 Low Limbo Road, Scranton, PA 12345.

• Michael Scott owns the remaining 60% interest (capital and profits) but does not actively manage the business. He tried to work on his rich friends to invest but sadly he was the only one who invested. Even Michael’s nana turned him down.
  • Michael’s address is 1234 Sandals Road, Scranton, PA 12345.

• Jan is listed as the Partnership Representative.
• The principal business activity is Retail, the principal code or service is Candles, and the business code number is 453990.
• Serenity uses the cost method to value its inventory and did not change the method during the year.
• Michael and Jan are both considered general partners.
• Serenity by Jan uses the accrual method of accounting.
• No changes in ownership occurred during the current year.
• Serenity made cash distributions of $155,050 to Jan and $232,576 to Michael, respectively.
• All liabilities are considered recourse liabilities.
• MACRS Depreciation is $68,811.
• Serenity by Jan purchased the Sabre Stock as an investment two years ago on December 1 for $50,000 and sold it on June 14 of the current year for $68,000. 1099-B showed the basis which was reported to the IRS.
• Serenity by Jan purchased the MSPC stock as an investment on February 1 of the current year for $120,000 and sold it on August 1 for $93,925. 1099-B showed the basis which was reported to the IRS.
• Serenity by Jan used land which it sold during the year for a 1231 gain as a parking lot for the business. Serenity purchased the land four years ago on March 17 for $40,000 and sold it on August 13 of the current year for $45,050.
• Assume 50% of meals expense is nondeductible but the remaining travel expenses are fully deductible.
• The partnership has no foreign partners, no foreign transactions, no interests in foreign trusts, and no foreign financial accounts.
• Ignore the US Domestic Production Activities Deduction and the Alternative Minimum Tax.
• Even if required, you do not have to attach Schedule B-1 or Form 8949 (or any other Form or Schedule that I did not say to include).
• For the Schedule D (Form 1065), you may need to look at Form 8949 to determine which lines to use. You do not need to complete Form 8949 though.
• All charity donations were cash contributions.

Kevin is not that familiar with partnerships, but he can provide you the following guidance:

• Kevin mentioned to you that Jan and Michael are self-employed, so to make sure you consider that.
• Regarding self-employed income, he remembered you had to take into account any guaranteed payments made. But he is not sure what to do.
• On Schedule K-1, Kevin mentioned that the Partner’s Capital Account related to the book reporting, not the tax reporting which aligns with Schedule M-2 on Form 1065.
• Kevin remembers three book-tax differences to be reconciled on Schedule M-1 on Form 1065, but he forgot them.
• On Page 5 of the 1065, Analysis of Net Income (Loss), Line 2, Kevin said to list Jan’s share of net income in the General Partner, Individual (active) box and Michael’s share of Net Income in the General Partner, Individual (passive) box.
• REQUIREMENT:
• prepare the income statement for the  Serentity  By Jan Partnership  2022

Answer rating: 100% (QA)

Serentity By Jan Partnership Income Statement for 2022 Sales 257300000 Returns and allowances 236000... View the full answer