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Ryan Ross (111-11-1111), Oscar Oleader (222-22-2222), Clark Carey (333-33-3333

),
and Kim Kardigan (444-44-4444) are equal members in ROCK of Ages, LLC. ROCK
serves as agents and managers for prominent musicians in the Los Angeles area. The
LLC's Federal ID number is 55-5555555. It uses the cash basis and the calendar year and
began operations on January 1, 2001. Its current address is 6102 Wilshire Boulevard,
Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as
Rhiannon and Burgundy 5 and has had a very profitable year. The following information
was taken from the LLC's income statement for the current year:
Revenues:
Fees and Commissions $4800000
Taxable interest income from bank deposits $1600
Tax-exempt interest $3200
Net gain on stock sales $4000
Total Revenues $4808800
Expenses:
Advertising and public relations $380,000
Charitable contributions $28000
Section 179 expense $20000
Employee salaries and wages $1000000
Guaranteed payment, Ryan Ross, office manager $800000
Guaranteed payment, other members $600000
Entertainment, subject to 50% disallowance $200000
Travel $320000
Legal and Accounting fees $132000
Office Rentals paid $80000
Interest Expense on operating line of credit $10000
Insurance Premium $52000
Office Expense $200000
Payroll taxes $92000
Utilities $54800
Total expenses $3968800
During the past couple of years, ROCK has taken advantage of bonus depreciation and
section 179 deductions and fully remodeled the premises and upgraded its leasehold
improvements. This year, ROCK wrapped up its remodel with the purchase of @20,000
of office furniture for which it will claim as section 179 deduction. (For simplicity,
assume that ROCK uses the same cost recovery methods for both tax and financial
purposes.) there is no depreciation adjustment for alternative minimum tax purposes.
ROCK invests much of its excess cash in non-dividend-paying growth stocks and taxexempt securities. During the year, the LLC sold two securities. On June 15, 2012,
ROCK purchased 1000 shares of Tech, Inc. stock for $100,000; it sold those shares on
Dec. 15, 2012, for $80,000. On March 15, 2006, ROCK purchased 2000 shares of
BioLabs, Inc. stock for $136,000; it sold those shares for $160,000 on Dec. 15, 2012.
Net income per books is $840,000. The firm's activities do not constitute "qualified
production activities" for purposes of the section 199 deduction. On Jan. 1, 2012, the

000 Marketable securities: 520. The LLC's balance sheet as of Dec. is as follows: Cash: 360.000 Accumulated Depreciation: (960. CA 90272 Additional Requirements . Ross: 200. In addition to their guaranteed payments.000 160.000 ?? Capital. LLC.000 Leasehold improvements: 960. Kardigan: 200.000) Total Assets: $1. Prepare Schedule K-1 for Ryan Ross. UT IRS Service Center. and capital: 1. 15520 W.000) (980. each member withdrew $250. and Other public figures" is 711410.000 980. Prepare Form 4562 and Schedule D. b. Prepare form 1065 for ROCK of Ages. Carey: 200.2012. Athletes.000 120.000 300. Oleander: 200.000. a. Each member has personally guaranteed the debt of the LLC.000 cash during the year. The business code for "Agents and Managers for Artists. Pacific Palisades. All members are active in LLC operations. 31.000 ?? Total Liab.000 ?? Capital.000 ?? Tax exempt securities: 120. No additional capital contributions were made in 2012.members' capital accounts equaled $200.000.000 ?? Capital.000 each. Earlson Street.000 ?? Assume that all debt is shared equally by the members. Entertainers. c.000 Capital. The LLC's Form 1065 was prepared by Ryan Ross and sent to Ogden.000 ?? Operating line of credit: 200.