Phil Williams and Liz Johnson are 60% and 40% partners, respectively, in Williams & Johnson…

Phil Williams and Liz Johnson are 60% and 40% partners,

respectively, in Williams & Johnson Partnership. Their beginning

basis is $33,000 for Phil and $31,000 for Liz. The partnership had the

following activity during the year:

Income $336,123

Interest income 1,259

Dividend income (qualified) 4,586

Long-term capital gains 13,458

Total revenue $355,426


Salaries and wages (nonpartners) $ 47,000

Guaranteed payments

Williams 75,000

Johnson 50,000

Depreciation (MACRS—includes $9,000 § 179 expense) 41,888

Interest expense 5,220

Taxes and licenses 15,548

Meals (100%) 15,257

Auto 5,254

Insurance (nonpartner health) 6,000

Accounting and legal 2,800

Repairs 1,200

Charitable contributions 2,500

Payroll penalties 500

Total expenses $268,167

Net income $ 87,259

a. Calculate the ordinary income for the partnership and prepare page

1 of Form 1065.

b. Prepare page 4 of Form 1065.

c. What is the ending basis for Phil Williams?

d. What is the ending basis for Liz Johnson?


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