General Partnership Named Tall Tale Books Case Assignment 

Question Description

Three friends, Xavier, Yasmin, and Zach formed a General partnership named Tall Tale Books on January 1, 2019. All three partners agreed to split profits and losses equally. Below are the partner’s contributions:
-Xavier: cash $55,000
-Yasmin: cash $55,000
-Zach: undeveloped land with tax basis of $35,000 and fair market value of $90,000. The land is encumbered with a $35,000 nonrecourse mortgage for which no partner is personally liable.
On December 31, 2019, Tall Tale Books, made a $3,500 principal payment on the mortgage. For the first year of operations, the partnership has the following results:

Sales revenue
$235,000
Cost of goods sold
205,000
Operating expenses
35,000
Long-term capital gains
1,200
§1231 gains
450
Charitable contributions
150
Municipal bond interest
150
Salary paid as a guaranteed payment to Yasmin (not included in expenses)
1,500

Requirements
Prepare Tall Tale Books 2019 Form 1065 page 1 and 4 (schedule K).
Prepare 2019 Schedule K-1 for Yasmin. In Part II of the K-1 you only need to show the partner’s name, you do not need to complete the other lines.