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Prepare a 2015 partnership return including all required schedules.
PRIMA DONNA PARTNERSHIP The Prima Donna Partnership (FEI 92-4765432) was formed ten years ago as a general partnership to custom tailor women’s clothing. Prima Donna is located at 123 Flamingo Drive in Haines City, MO 54321. Mariana Prima manages the business and has a 45% capital and profits interest. Her address is 709 Brumby Way, Haines City, MO 54321. Donna Hart owns the remaining 55% interest but is not active in the business. Her address is 807 Ninth Avenue Haines City, MO 54321. The partnership values its business using the cost method and did not change the method used during the current year. The partnership uses the accrual method of accounting. Because of its simplicity the partnership is not subject to partnership audit procedures. The partnership has no foreign partners, no foreign transactions, no interest in foreign trusts, and no foreign bank accounts. This partnership is neither a tax shelter nor a publicly traded partnership. No changes in ownership of partnership interest occurred during the current year. The partnership made cash distributions of $202,500 and $247,500 to Prima and Hart, respectively, on December 30, 2015. It made no other cash or property distributions during the year. Assume that the business qualifies as a US production activity and that its qualified production activity income is $560,000. As an eligible small pass-though partnership, uses the small business simplified overall method for reporting these activities. See the financial statements for the period that follow. Required: Prepare a 2015 partnership return including all required schedules.
Prima-Donna Partnership Income Statement for the 12 months ended December 31, 2015 Sales $2,375,000 Returns and allowances (16,300) $2,358,700 Beginning Inventory (FIFO method) $200,050 Purchases 624,000 Labor 600,000 Supplies 45,247 Other costs a 12,000 Goods Available for Sale $1,481,297 Ending Inventory b (146,000) (1,335,297) Gross Profit $1,023,403 Salaries for employees 52,000 Guaranteed payment for Prima 65,000 Utilities Expense 52,457 Depreciation (MACRS is $64,327) c 41,425 Automobile Expense 12,085 Office Supplies Expense 4,420 Advertising expense 85,000 Bad Debt Expense 5,210 Interest Expense d 45,000 Rent Expense 8,256 Travel Expense e 11,020 Repairs and Maintenance 42,000 Accounting and Legal Expense 32,500 Charitable Contributions f 16,400 Payroll Taxes 5,180 Other Taxes 2,000 Total Expense 479,953 Operating Profits $543,450 Other Income and losses: Gain on sale of AB stock g 18,000 Loss on sale of CD stock h (26,075) Sec. 1231 gain on sale of land i 6,000 Interest on US Treasury bills j 2,000 Dividends from 15% owned domestic corporation 11,000 10,925 Net Income $554,375 a Additional Sec 263A costs of $4,000 for the current year are included in other costs. b Ending inventory includes the appropriate Sec. 263A costs and no further adjustment is needed for tax purposes. c The partnership reports a $8,000 positive AMT adjustment for property placed in service after 1986. They acquired and placed in service $32,000 of rehabilitation expenditures for certified historical property this year. The appropriate MACRS depreciation on this is included in the MACRS amount of $64,327. d All trade or business related e Meals of $6,050 are included in the travel expense. f The partnership made all contributions in cash to qualifying charities. g The partnership purchased the AB stock as an investment two years ago on December 1 for $40,000 and sold it on June 14 of the current year. h The partnership purchased the CD stock as an investment on February 15 of the current year for $100,000 and sold it on August 1 for $73,925. i The partnership used the land as a parking lot for the business. The partnership purchased the land four years ago on March 17 for $30,000 and sold it on August of this year for $36,000. j Based on $80,000 face amount
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