Continuing fromWeek 1, in the current tax year, BJS, LLC rented land and a building, which housed computers and other related equipment for use in its business operations from WADA, Inc. WADA, Inc. is a 501(c)(3) organization that provides counseling services for victims of domestic abuse. The rental agreement between BJS, LLC and WADA, Inc. states that $13,000 is the rent per annum for the computers and other related equipment. This was the only rental that BJS, LLC had in this tax year.
In this tax year, WADA, Inc. has $275,000 of unrelated business income excluding any rental income received. Charitable contributions made by WADA, Inc. associated to unrelated trade or businesses are $15,000 and contributions not associated to unrelated trade or businesses are $10,000 for the current tax year.
Tasks:
- Calculate the unrelated business taxable income for WADA, Inc. for the current tax year using the information above.
- Describe how you came to your calculations.
- Analyze the implications for WADA based on your calculations.
Open Point Client Name BJS, LLC Year 2021 Points No. Description 1In the absence few information, we have assumed/inputted the following in the form 1065 a. Principal Business Activity - XYZ b. Principal Product or Service - Service c. Business Code Number - 0000000 d. Accounting Method - Cash e. Type of Entity - Domestic Limited Liability Company 2Schedule B questions are answered to the best of our knowledge. Please confirm 3Jim Smith is considered as an Designated Partner Representative 4All the 5 Partners are assumed as the General Partners and are not Limited Partners 5The Johnson Neuman Trust is assumed to be a Tax Exempt Organization 6As this is the first year of operation, we have assumed that there was no activity for previous 4 years and all the given transaction are done in the current year. 7As the Vehicle is purchased on the last day of the year, no depreciation is calculated and only the Assets is record in the books. 8Please refer to the Tab 'Working' for the following a. Profit and Loss b. Balance Sheet c. Cash Flow d. Profit and Loss Percentage as per Capital Contribution Working Profit and Loss Balance Sheet Sales755000Liability Amount ($)Assets Amount ($)3855000 Payroll Expenses55000Capital Contribution Cash4,405,000.001250000 Rent Expenses150000Jim 1,500,000.0045000 Betsy1,200,000.00Land 1,250,000.00 Sandco Industries Inc 1,250,000.00 Net Profit and Loss 550000The Johnson Neuman Trust700,000.00Vehicle 45,000.00 Tiger, Inc.500,000.00 Net Profit 550,000.00 Total 5,700,000.00Total 5,700,000.00- 0 Cash Flow Amount ($) Capital Amount Profit Break UpProfit and Loss %Contribution by Jim1,500,000.00 Jim 1,500,000.00160,194.1729.13Contribution by Besty1,200,000.00 Betsy1,200,000.00128,155.3423.30Contribution by The Johnson Neuman Trust 700,000.00 Sandco Industries Inc 1,250,000.00133,495.1524.27Tiger Inc500,000.00 The Johnson Neuman Trust700,000.0074,757.2813.59Vehicle Purchased (45,000.00) Tiger, Inc.500,000.0053,398.069.71Income 755,000.00 5,150,000.00550000100.00Payroll Expenses(55,000.00) Rent Expenses(150,000.00) Cash Flow During the Year 4,405,000.00 2021 Form 1065 Form 1065 2021 U.S. Return of Partnership Income Department of the Treasury Internal Revenue Service ▶ Go to www.irs.gov/Form1065 for instructions and the latest information. OMB No. 1545-0123 For calendar year 2021, or tax year beginning , 2021, ending , 20 . Type or Print Name of partnership Number, street, and room or suite no. If a P.O. box, see instructions. City or town, state or province, country, and ZIP or foreign postal code A Principal business activity B Principal product or service C Business code number D Employer identification number E Date business started F Total assets (see instructions) $ G Check applicable boxes: (1) Initial return (2) Final return (3) Name change (4) Address change (5) Amended return H Check accounting method: (1) Cash (2) Accrual (3) Other (specify) ▶ I Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year ▶ J Check if Schedules C and M-3 are attached . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ K Check if partnership: (1) Aggregated activities for section 465 at-risk purposes (2) Grouped activities for section 469 passive activity purposes Caution: Include only trade or business income and expenses on lines 1a through 22 below. See instructions for more information. In co m e 1a Gross receipts or sales . . . . . . . . . . . . . . . . . 1a b Returns and allowances . . . . . . . . . . . . . . . . 1b c Balance. Subtract line 1b from line 1a . . . . . . . . . . . . . . . . . . . . 1c 2 Cost of goods sold (attach Form 1125-A) . . . . . . . . . . . . . . . . . . 2 3 Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . . . . 3 4 Ordinary income (loss) from other partnerships, estates, and trusts (attach statement) . . . . 4 5 Net farm profit (loss) (attach Schedule F (Form 1040)) . . . . . . . . . . . . . . 5 6 Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . . . . 6 7 Other income (loss) (attach statement) . . . . . . . . . . . . . . . . . . . 7 8 Total income (loss). Combine lines 3 through 7 . . . . . . . . . . . . . . . . 8 D ed uc ti o ns (s ee in st ru ct io ns fo r lim ita tio ns ) 9 Salaries and wages (other than to partners) (less employment credits) . . . . . . . . . 9 10 Guaranteed payments to partners . . . . . . . . . . . . . . . . . . . . . 10 11 Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . 11 12 Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 Interest (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . 15 16a Depreciation (if required, attach Form 4562) . . . . . . . . . . 16a b Less depreciation reported on Form 1125-A and elsewhere on return . 16b 16c 17 Depletion (Do not deduct oil and gas depletion.) . . . . . . . . . . . . . . . 17 18 Retirement plans, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 18 19 Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . 19 20 Other deductions (attach statement) . . . . . . . . . . . . . . . . . . . . 20 21 Total deductions. Add the amounts shown in the far right column for lines 9 through 20 . . . 21 22 Ordinary business income (loss). Subtract line 21 from line 8 . . . . . . . . . . . 22 T ax a nd P ay m en t 23 Interest due under the look-back method—completed long-term contracts (attach Form 8697) . 23 24 Interest due under the look-back method—income forecast method (attach Form 8866) . . . 24 25 BBA AAR imputed underpayment (see instructions) . . . . . . . . . . . . . . . 25 26 Other taxes (see instructions) . . . . . . . . . . . . . . . . . . . . . . 26 27 Total balance due. Add lines 23 through 26 . . . . . . . . . . . . . . . . . 27 28 Payment (see instructions) . . . . . . . . . . . . . . . . . . . . . . . 28 29 Amount owed. If line 28 is smaller than line 27, enter amount owed . . . . . . . . . . 29 30 Overpayment. If line 28 is larger than line 27, enter overpayment . . . . . . . . . . 30 Sign Here Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than partner or limited liability company member) is based on all information of which preparer has any knowledge. ▲ Signature of partner or limited liability company member ▲ Date May the IRS discuss this return with the preparer shown below? See instructions. Yes No Paid Preparer Use Only Print/Type preparer’s name Preparer’s signature Date Check if self-employed PTIN Firm’s name ▶ Firm’s EIN ▶ Firm’s address ▶ Phone no. For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11390Z Form 1065 (2021) Form 1065 (2021) Page 2 Schedule B Other Information Yes No1 What type of entity is filing this return? Check the applicable box: a Domestic general partnership b Domestic limited partnership c Domestic limited liability company d Domestic limited liability partnership e Foreign partnership f Other ▶ 2 At the end of the tax year: a Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or tax- exempt organization, or any foreign government own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership? For rules of constructive ownership, see instructions. If “Yes,” attach Schedule B-1, Information on Partners Owning 50% or More of the Partnership . . . . . . . . . . . . . . . b Did any individual or estate own, directly or indirectly, an interest