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:

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  • The LLC’s Federal ID number is 35-8675309
  • 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 (321-45-6789), 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 2016:

Income Statement

Revenues

Fees and Commissions

$5,500,000

Taxable interest income from bank deposits

3,800

Tax-exempt interest

2,900

Net gains

7,500

Total revenues

$5,514,200

Expenses

Advertising and public relations

$475,000

Charitable contributions

44,000

Section 179 expense

82,000

Employee salaries and wages

995,000

Guaranteed payment, Cory Matthews, office manager

550,000

Guaranteed payment, other members

690,000

Meals and Entertainment

194,000

Travel

325,000

Legal and accounting fees

130,000

Office rentals paid

95,000

Interest expense on operating line of credit

8,000

Liability insurance premium

60,000

Office expense

190,000

Payroll taxes

90,000

Utilities

65,000

Total expenses

$3,993,000

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 it’s remodeling with the purchase of $82,000 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 July 4, 2016, the company purchased 1,500 shares of Jules, Inc. stock for $130,000; it sold those shares on December 6, 2016 for $130,500. On January 10, 2006, Feeny purchased 2,500 shares of Bait, Inc. stock for $102,000; it sold those shares for $106,000 on December 6, 2016. Both sales were reported by Feeny’s broker on a 1099-B with basis information. Feeny also sold equipment originally costing $7,400 when purchased on February 2, 2005, for $3,000 on June 15, 2016. The equipment had been fully depreciated.

Net income per books is $1,521,200. The firm’s activities do no constitute “qualified production activities” for purposes of the §199 deduction. On January 1, 2016, the members’ capital accounts equalled $365,175 each. No additional capital contributions were made in 2016. In addition to their guaranteed payments, each member withdrew $350,000 cash during the year.

Feeny’s book balance sheet as of December 31, 2016 is as follows.

Beginning

Ending

Cash

$1,283,500

$ ??

Tax-exempt securities

110,000

140,000

Marketable securities

217,200

320,200

Leasehold improvements, furniture, and equipment

1,009,000

1,050,600

Accumulated depreciation

(1,009,000)

(1,050,600)

Total assets

$1,610,700

$ ??

Line of credit for operations

$150,000

150,000

Capital, Cory

365,175

??

Capital, Eric

365,175

??

Capital, Shawn

365,175

??

Capital, Topanga

365,175

??

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 members are active in Feeny University’s operations. Prepare Form 1065 for the partnership with all required supporting forms and schedules. However,
only prepare Schedule K-1 for Cory Matthews, 567 Phillips Road, Philadelphia, PA 19109. Submit as one PDF as per the instructions.

 
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