1065 Tax Return
1065 Tax Return
Feeny University, LLC serves as tutors and instructors for college students in the Philadelphia area. Relevant information is as follows:
• The LLC’s Federal ID number is 00-8675309
• Feeny uses the cash basis and the calendar year
• The LLC began operations on September 24, 1993
• The current address is 5688 James Highway, Suite 1000, Philadelphia, PA 19120
• Feeny is comprised of four equal members: Cory Matthews (123-45-6789), Eric Matthews (987-65-4321), Shawn Hunter (101-01-0101), and Topanga Lawrence-Matthews (010-10-1010)
The following information was taken from the LLC’s income statement for the current year:
Fees and Commissions $4,600,000
Taxable interest income from bank deposits 1,800
Tax-exempt interest 3,400
Net gain on stock sales 4,200
Total revenues $4,609,400
Advertising and public relations $370,000
Charitable contributions 27,000
Section 179 expense 19,000
Employee salaries and wages 987,000
Guaranteed payment, Cory Matthews, office manager 810,000
Guaranteed payment, other members 610,000
Entertainment, subject to 50% disallowance 202,000
Legal and accounting fees 134,000
Office rentals paid 85,000
Interest expense on operating line of credit 11,000
Insurance premium 50,000
Office expense 201,000
Payroll taxes 90,000
Total expenses $3,957,000
During the past few years, Feeny University has taken advantage of bonus depreciation and §179 deductions and fully remodeled the premises and upgraded its leasehold improvements. This year, Feeny wrapped ups its remodeling with the purchase of $19,000 of office furniture, for which it will claim a §179 deduction. Feeny University uses the same cost recovery methods for both tax and financial purposes. There is no depreciation adjustment for alternative minimum tax purposes.
Feeny invests much of its excess cash in non-dividend-paying growth stocks and tax-exempt securities. During the year, the LLC sold two securities. On June 6, 2013, the company purchased 1,500 shares of Jules, Inc. stock for $120,800; it sold those shares on December 13, 2013 for $128,000. On April 20, 2006,Feeny purchased 3,000 shares of Bait, Inc. stock for $204,000; it sold those shares for $201,000 on December 13, 2014.
Net income per books is $652,400. The firm’s activities do no constitute “qualified production activities” for purposes of the §199 deduction. On January 1, 2014, the members’ capital accounts equalled $200,000 each. No additional capital contributions were made in 2014. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year.
Feeny’s book balance sheet as of December 31, 2014 is as follows.
Cash $350,000 $ ??
Tax-exempt securities 110,000 110,000
Marketable securities 540,000 320,000
Leasehold improvements, furniture, and equipment 970,000 990,000
Accumulated depreciation (970,000) (990,000)
Total assets $1,000,000 $ ??
Line of credit for operations $200,000 150,000
Capital, Cory 200,000 ??
Capital, Eric 200,000 ??
Capital, Shawn 200,000 ??
Capital, Topanga 200,000 ??
Total liabilities and capital $1,000,000 $ ??
All debt is shared equally by the members. Each member has personally guaranteed the debt of the LLC.
The business code for “Educational services (including schools, colleges, & universities)” is 611000. The LLC’s Form 1065 was prepared by Cory Matthews and sent to the Scranton, PA IRS Service Center. All of the owners are active in Feeny University’s operations. Prepare Schedule K-1 for Cory Matthews, 567 Phillips Road, Philadelphia, PA 19109.