Marty Blaze (258-13-7946), Ron Barnett

Marty Blaze (258-13-7946), Ron Barnett

Question
	1065 Tax Return
Marty Blaze (258-13-7946), Ron Barnett (915-46-7382), Dwayne Seller (753-82-4691), and Laura Mouse (465-28-1397) are equal members in Champs Equipment, LLC. Champs serves as agents and managers for prominent athletes in the Detroit area. The LLC’s Federal ID number is 63-9875421. It uses the cash basis and a calendar tax year, and it began operations on January 1, 2001. Its current address is 1397 Townsend Avenue, Suite 6500, Detroit, MI 56007. Champs was the force behind such athletic icons as Harry Berd and Mike Jarden., and it 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	$4,800,000
Taxable interest income from bank deposits	1,600
Tax-exempt interest	3,200
Net gains on stock sales	4,000
Total revenues	$4,808,800

Expenses	
Advertising and public relations	$380,000
Charitable contributions	28,000
Section 179 expense	20,000
Employee salaries and wages	1,000,000
Guaranteed payment, Marty Blaze, office manager	800,000
Guaranteed payment, other members	600,000
Entertainment, subject to 50% disallowance	200,000
Travel	320,000
Legal accounting fees	132,000
Office rentals paid	80,000
Interest expense on line of credit for operations	10,000
Insurance premiums	52,000
Office expense	200,000
Payroll taxes	92,000
Utilities	54,800
Total expenses	$3,968,800

During the past few years, Champs has taken advantage of bonus depreciation and §179 deductions and fully remodeled the premises and upgraded its leasehold improvements. This year, Champs wrapped ups its remodeling with the purchase of $20,000 of office furniture, for which it will claim a §179 deduction. Champs uses the same cost recovery methods for both tax and financial purposes. There is no depreciation adjustment for alternative minimum tax purposes.
Champs 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 15, 2012, Champs purchased 1,000 shares of Mark, Inc. stock for $100,000; it sold those shares on December 15, 2012 for $80,000. On March 14, 2006, Champs purchased 2,000 shares of Lure, Inc. stock for $136,000; it sold those shares for $160,000 on December 15, 2012.
Net income per books is $840,000. The firm’s activities do no constitute “qualified production activities” for purposes of the §199 deduction. On January 1, 2012, the members’ capital accounts equalled $200,000 each. No additional capital contributions were made in 2012. In addition to their guaranteed payments, each member withdrew $250,000 cash during the year.
Champ’s book balance sheet as of December 31, 2012 is as follows.
Beginning	Ending
Cash	$360,000	$ ??
Tax-exempt securities	120,000	120,000
Marketable securities	520,000	300,000
Leasehold improvements, furniture, and equipment	960,000	980,000
Accumulated depreciation	(960,000)	(980,000)
Total assets	$1,000,000	$ ??
Line of credit for operations	$200,000	160,000
Capital, Blaze	200,000	??
Capital, Barnett	200,000	??
Capital, Seller	200,000	??
Capital, Mouse	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 “Agents and Managers for Artists, Athletes, Entertainers, and Other Public Figures” is 711410. The LLC’s Form 1065 was prepared by Marty Blaze and sent to the Wichita, KS IRS Service Center. All of the owners are active in Champ’s operations. Prepare Schedule K-1 for Marty Blaze, 67920 Hammond Road, Conway, MI 56008.