Homework answers / question archive / Ryan Ross (111-11-1112), Oscar Omega (222-22-2222), Clark Carey (333-33-3333), and Kim Kardigan (444-44-4444) are equal active members in ROCK the Ages LLC

Ryan Ross (111-11-1112), Oscar Omega (222-22-2222), Clark Carey (333-33-3333), and Kim Kardigan (444-44-4444) are equal active members in ROCK the Ages LLC

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Ryan Ross (111-11-1112), Oscar Omega (222-22-2222), Clark Carey (333-33-3333), and Kim Kardigan (444-44-4444) are equal active members in ROCK the Ages LLC. ROCK serves as agents and managers for prominent musicians in the Los Angeles area. The LLC's Federal ID number is 55-5555555. It uses the cash basis and the calendar year and began operations on January 1, 2004. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as Rhiannon, Burgundy Six, Elena Gomez, Tyler Quick, the Moonwalkers, and Conjuring Dragons and has had a very profitable year. The following information was taken from the LLC's income statement for the current year:

During the past couple of years, 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, 2015, ROCK purchased 1,000 shares of Tech, Inc., stock for $100,000; it sold those shares on December 15, 2015, for $80,000. On March 15, 2014, ROCK purchased 2,000 shares of BioLabs, Inc., stock for $136,000; it sold those shares for $160,000 on December 15, 2015. 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. The firm's activities do not constitute “qualified production activities” for purposes of the § 199 deduction. On January 1, 2015, the members' capital accounts equaled $200,000 each. No additional capital contributions were made in 2015. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year. The LLC's balance sheet as of December 31, 2015, is as follows:

Assume that all debt is shared equally by the members. Each member has personally guaranteed the debt of the LLC.

The business code for “Agents and Managers for Artists, Athletes, Entertainers, and Other Public Figures” is 711410. The LLC's Form 1065 was prepared by Ryan Ross and sent to the Ogden, UT IRS Service Center. All members are active in LLC operations.

a. Prepare Form 1065, pages 1, 4, and 5, for ROCK the Ages LLC using tax basis information for Schedules L and M–2.

b. Prepare Form 4562 and Schedule D.

c. Prepare Schedule K–1 for Ryan Ross, 15520 W. Earlson Street, Pacific Palisades, CA 90272.

Revenues: Fees and commissions Taxable interest income from bank deposits Tax-exempt interest Net gain on stock sales Total revenues Expenses: Advertising and public relations Charitable contributions Section 179 expense Employee salaries and wages Guaranteed payment (services), Ryan Ross, office manager Guaranteed payment (services), other members Entertainment, subject to 50% disallowance Travel Legal and accounting fees Office rentals paid Interest expense on operating line of credit Insurance premiums Office expense Payroll taxes Utilities Total expenses $4,800,000 1,600 3,200 4,000 $4,808,800 380,000 28,000 20,000 1,000,000 800,000 600,000 200,000 320,000 132,000 80,000 10,000 52,000 200,000 92,000 54,800 $3,968,800