Required:
• Using the information provided below, complete Aspen Ridge
limited
partnership’s page 1 of Form 1065; complete Schedule K on
page 4 of
Form 1065; complete lines 1 and 2 of the Analysis of Net
Income (Loss) at
the top of page 5 of Form 1065; and complete Schedules M-1
and M-2 at
the bottom of page 5 of Form 1065. Finally, complete Mark
Sullivan’s
Schedule K-1.
• Form 4562 for depreciation is not required. Include any tax
depreciation or
Section 179 expense on the appropriate line of page 1 of Form
1065 or
Schedule K.
• If any information is missing, use reasonable assumptions
to fill in any
gaps.
• The forms, schedules, and instructions can be found at the
IRS Web
site (www.irs.gov). The instructions can be helpful in
completing
the forms.
Facts:
The Aspen Ridge limited partnership was formed on April 1,
2009, by Mark Sullivan,
its general partner, and two other limited partners when they
each contributed
an equal amount of cash to start the new enterprise. Aspen
Ridge is an outdoor
equipment retailer selling camping, fi shing, skiing, and
other outdoor gear to the
general public. Mark has a 33.33% profi ts and capital
interest and the limited partners
hold the remaining 66.66% of the profi ts and capital
interests. Their profi ts and
capital interests have remained unchanged since the
partnership was formed. Mark
is actively involved in managing the business while the
limited partners are simply
investors.
• Aspen Ridge is located at 1065 North 365 South, Ogden, UT,
84401.
• The employer identification number for Aspen Ridge is
85-8976654.
• Aspen Ridge uses the accrual method of accounting and has a
calendar
year end.
• Mark’s address is 543 Wander Lane, Holliday, UT 84503.
The following is Aspen Ridge’s 2011 income statement for
books:
Aspen Ridge Income Statement
For year ending December 31, 2011
Sales 965,500
Sales Returns and Allowances (9,700)
Cost of Goods Sold (538,200)
Gross Profit from Operations 417,600
Other Income:
Interest from money market account 3,200
Gain from sale of photograph 34,000
Gross Income 454,800
C-20 Appendix C
Notes:
1. Aspen Ridge has total assets of $1,725,800 and total
liabilities of $540,300 at
the beginning of the year and total assets of $2,065,300 and
total liabilities of
$806,640 at the end of the year.
2. Partnership liabilities consist of accounts payable, and
Mark, as general partner,
is legally responsible for paying these liabilities if the
partnership does not.
3. Two years ago, Aspen Ridge purchased an original Ansel
Adams outdoor landscape
photograph with the intent to display it permanently in the
retail store.
This year, however, the photograph was sold to a local ski
lodge where it is now
hangs on the wall. The $34,000 recognized gain from the sale
is reflected in the
income statement above.
4. For tax purposes, Aspen Ridge has consistently elected
under Section 179 to
expense any furniture or fixtures purchased every year since
it was formed.
As a result, it does not have a tax basis in any of its
depreciable assets. This year,
Aspen Ridge expensed $17,300 of signs and display cases for
tax purposes.
5. On November 20th, Aspen Ridge distributed $180,000
($60,000 per partner) to
the partners.
6. Miscellaneous expenses include a $900 fine for violating a
local signage ordinance.
7. Aspen Ridge maintains its books using generally accepted
accounting
principles.
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