Please read the complete instructions carefully and fill out the IRS Form 1065 and Schedule K-1 for the year 2022. Please don’t miss out on any details, and make sure that your calculations are correct.
Project Parameters:
On November 1, 2000 Ira Keyes and Mary Yellen formed Comparative Advantage, Ltd., to sell high-end
consulting services to people trying to make their pets Instagram stars. Pertinent information regarding
Comparative Advantage, Ltd. is as follows:
1) Comparative’s business address is 5555 Nevermind, Dr., Charlotte, N.C. 20631. Its telephone
number is (555)555-2211, and its email address is jlbrtny@aol.com
2) The employer identification number is 11-111112, and the principal business activity code is
453910.
3) Ira owns 50% and Mary 50% of the company, and they are both full-time employees and officers
of the company. They each paid $2,500,000 for their interests in the company when it was
formed. No subsequent investments have been made.
4) Ira’s Social security number is 123-45-6788, Mary’s social security number is 123-45-6787.
5) Comparative is an accrual method, calendar year taxpayer. It uses the straight line method of
depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes.
6) The company’s average receipts for the prior three years were $3,000,000.
7) The company had an accumulated NOL at the beginning of the year equal to $1,000,000. The
NOL was generated during 2021.
8) During the year the company made $300,000 of cash distributions to its owners.
9) The entity has no foreign owners, and doesn’t engage in any international activity.
10) The company did not pay any 1099 contractors for the year.
11) If the return is asking a yes/no question and the transaction or activity is not mentioned in the
problem, assume the answer is no.
The Appendix provides the book Income Statement and Balance Sheet for Comparative’s 2022 fiscal
year.
Required: Prepare the 2022 tax return for Comparative Advantage, Ltd. as if it is organized as a General
Partnership.
1) You are required to prepare the 2022 form 1065 pages 1-5. No other sub-schedules are required.
If something on those pages is not relevant for this company you can leave it blank. You do not
have to complete schedule M-3 even though the assets are over $10,000,000.
2) Prepare the Schedule K-1 for Ira.
3) The salaries paid to Ira and Mary are considered guaranteed payments for services performed.
4) All partners are jointly and severally liable for any partnership debt.
5) Ira is considered the Partnership’s Representative and the General Partner and uses the address
and telephone number of the company as his address.
6) The partnership agreement states all allocable items will be split equally between the partners.
7) You can assume the beginning book capital account balance is split equally between the partners
and is equal to the beginning tax basis capital account balance.
IF ORGANIZED AS A PARTNERSHIP
Income Statement
Income
Gross Sales
FYE 12/31
4,000,000
Dividends from Investments in less more than 20% but less than 60%
Owned U.S. Corporations
Interest from In-State Municipal Bonds
Interest from Certificates of Deposit
63,750
30,000
20,000
Net capital loss on investments held for longer than a year
(15,000)
Total Income
Expenses
Guranteed Payments
Ira
Mary
4,098,750
415,000
310,000
725,000
Other Salary
Taxes (State, Local and Payroll)
Utilities
Business Loan Interest
Advertising
Rental Expense
Depreciation
Charitable Contributions (Cash)
Business Meals
825,000
240,000
140,000
226,000
62,000
115,000
96,000
42,000
60,000
Total Expenses
2,531,000
Net Income
1,567,750
Balance Sheet
January 1st
December 31st
Cash
Accounts Receivable
Investment in State Municipal Bonds
Stock Investments
Certificates of Deposit
Buildings and other Depreciable Assets
Accumulated Depreciation
Land
1,300,000
2,150,000
370,000
3,875,000
300,000
5,600,000
(616,000)
1,052,500
2,216,250
2,160,000
375,000
4,500,000
450,000
5,600,000
(712,000)
1,041,000
Total assets
14,031,500
15,630,250
Liabilities and Equity
Accounts Payable
Other current Liabilities
Business Loan
Mortgages due in more than 1 year
Capital Account
2,484,000
180,000
2,500,000
3,125,000
5,742,500
2,840,000
155,000
3,000,000
2,625,000
7,010,250
Total Liabilities and Equity
14,031,500
15,630,250
651121
Final K-1
2022
Schedule K-1
(Form 1065)
Department of the Treasury
Internal Revenue Service
14
Self-employment earnings (loss)
15
Credits
Part III Partner’s Share of Current Year Income,
Deductions, Credits, and Other Items
/
2022
/
/
ending
/
Partner’s Share of Income, Deductions,
See separate instructions.
Credits, etc.
A
OMB No. 1545-0123
1
Ordinary business income (loss)
2
Net rental real estate income (loss)
3
Other net rental income (loss)
4a
Guaranteed payments for services
4b
Guaranteed payments for capital
16
Schedule K-3 is attached if
checked . . . . .
4c
Total guaranteed payments
17
Alternative minimum tax (AMT) items
5
Interest income
6a
Ordinary dividends
6b
Qualified dividends
18
Tax-exempt income and
nondeductible expenses
6c
Dividend equivalents
7
Royalties
8
Net short-term capital gain (loss)
19
Distributions
Net long-term capital gain (loss)
20
Other information
21
Foreign taxes paid or accrued
For calendar year 2022, or tax year
beginning
Part I
Amended K-1
Information About the Partnership
Partnership’s employer identification number
B
Partnership’s name, address, city, state, and ZIP code
C
IRS center where partnership filed return:
D
Check if this is a publicly traded partnership (PTP)
Part II
E
F
Information About the Partner
Partner’s SSN or TIN (Do not use TIN of a disregarded entity. See instructions.)
Name, address, city, state, and ZIP code for partner entered in E. See instructions.
G
General partner or LLC
member-manager
Limited partner or other LLC
member
9a
H1
Domestic partner
Foreign partner
9b
Collectibles (28%) gain (loss)
H2
If the partner is a disregarded entity (DE), enter the partner’s:
9c
Unrecaptured section 1250 gain
10
Net section 1231 gain (loss)
11
Other income (loss)
12
Section 179 deduction
13
Other deductions
TIN
Name
I1
What type of entity is this partner?
I2
If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here
J
Partner’s share of profit, loss, and capital (see instructions):
Beginning
Ending
Profit
%
%
Loss
%
%
Capital
%
%
Check if decrease is due to sale or exchange of partnership interest
K
.
.
.
Partner’s share of liabilities:
Beginning
Nonrecourse
.
$
$
Qualified nonrecourse
financing . . .
$
$
Recourse
$
$
.
.
Ending
.
.
Check this box if item K includes liability amounts from lower-tier partnerships
22
More than one activity for at-risk purposes*
.
.
$
23
More than one activity for passive activity purposes*
Capital contributed during the year .
.
$
*See attached statement for additional information.
Current year net income (loss) .
.
$
Partner’s Capital Account Analysis
L
Beginning capital account
.
.
M
Withdrawals and distributions .
.
.
$(
Ending capital account
.
.
$
.
Did the partner contribute property with a built-in gain (loss)?
Yes
N
.
No
If “Yes,” attach statement. See instructions.
Partner’s Share of Net Unrecognized Section 704(c) Gain or (Loss)
Beginning
.
.
.
.
.
.
.
.
$
Ending .
.
.
.
.
.
.
.
.
$
For Paperwork Reduction Act Notice, see the Instructions for Form 1065.
)
For IRS Use Only
Other increase (decrease) (attach explanation) $
www.irs.gov/Form1065
Cat. No. 11394R
Schedule K-1 (Form 1065) 2022
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