## Correct Answers: Review & Corrections Let's review the provided answers and identify the correct values. We'll go section by section. --- ### Section 179 Deduction | Line | Description | Provided Answer | Correct? | Correct Answer | Explanation | |------|-------------|----------------|----------|---------------|-------------| | 1 | Maximum amount | 50,000 | ❌ | **1,160,000** | 2023 limit is $1,160,000, not $50,000. | | 2 | Total cost of 179 property | 20,000 | ✅ | 20,000 | Only $20,000 office furniture purchased. | | 3 | Threshold cost | 20,000 | ❌ | **2,890,000** | 2023 threshold is $2,890,000. | | 4 | Reduction in limitation | | ✅ | | $20,000 < $2,890,000, so no reduction. | | 5 | Dollar limitation | 20,000 | ❌ | **1,160,000** | $1,160,000 minus $ reduction. | | 8 | Total elected cost | 20,000 | ✅ | 20,000 | As above. | | 9 | Tentative deduction | 20,000 | ✅ | 20,000 | Lesser of line 5 or 8. | | 10 | Carryover | | ✅ | | No prior year carryover. | | 11 | Business income limit | 500,000 | ❌ | **1,160,000** | Should be the LLC's net business income, but $500,000 is not justified in the facts. Net income per books was $840,000. | | 12 | Section 179 expense | 20,000 | ✅ | 20,000 | Lesser of line 9 or 11. | **Summary:** Most numbers are correct except for the maximum amount, threshold, and business income limitation, which use the wrong values for 2023. --- ### Schedule M-2 | Line | Description | Provided Answer | Correct? | Correct Answer | Explanation | |------|-------------|----------------|----------|---------------|-------------| | 1 | Beginning balance | 800,000 | ✅ | 800,000 | 4 × $200,000. | | 2 | Contributions (cash) | | ✅ | | No new contributions. | | 3 | Net income per books | 2,336,800 | ✅ | 2,336,800 | Matches net income on books. | | 4 | Other increases | 640,000 | ❌ | | No other increases; likely a miscalculation. | | 5 | Total lines 1–4 | 2,496,800 | ❌ | 3,136,800 | 800,000 + + 2,336,800 + . | | 6 | Distributions (cash) | 1,000,000 | ✅ | 1,000,000 | 4 × $250,000. | | 7 | Other decreases | 3,968,800 | ❌ | | None indicated. | | 8 | Add 6 and 7 | 1,000,000 | ❌ | 1,000,000 | Should be correct if only cash distributions. | | 9 | Balance at end of year | 640,000 | ✅ | 2,136,800 | 3,136,800 - 1,000,000. | **Summary:** The beginning and net income are correct; the other increases and decreases are incorrect. Ending capital should be $2,136,800. --- ### Balance Sheet (Ending) - **Cash:** Beginning: $444,000 Withdrawals: $1,000,000 Net income: $2,336,800 Purchases: $20,000 (furniture) Stock sales: $80,000 (net cash in), $160,000 (net cash in), but purchased for ($100,000) and ($136,000) respectively. So, Ending cash = 444,000 + 2,336,800 + 80,000 + 160,000 - 100,000 - 136,000 - 20,000 - 1,000,000 = 444,000 + 2,336,800 + 240,000 - 256,000 - 20,000 - 1,000,000 = 444,000 + 2,336,800 + 240,000 - 1,276,000 = 3,020,800 - 1,276,000 = **$1,744,800** (ending cash) - **Tax-exempt securities:** $120,000 (beginning, likely unchanged) - **Marketable securities:** $436,000 (beginning, needs adjustment for sales/purchases) - **Leasehold/furniture/equipment:** $980,000 + $20,000 = $1,000,000 (ending) - **Accumulated depreciation:** $960,000 (unchanged, as no book depreciation) - **Total assets:** $1,000,000 (should match total liabilities/capital) --- ## Final Summary ### 1. Section 179 Deduction - **Maximum allowed (2023):** $1,160,000 - **Total cost of 179 property placed in service:** $20,000 - **Threshold (2023):** $2,890,000 - **Reduction:** $ - **Dollar limitation:** $1,160,000 - **Elected cost:** $20,000 - **Tentative deduction:** $20,000 - **Carryover:** $ - **Business income limitation:** $840,000 (net income per books) - **Section 179 deduction allowed:** $20,000 ### 2. Schedule M-2 - **Beginning capital:** $800,000 - **Contributions:** $ - **Net income per books:** $2,336,800 - **Other increases:** $ - **Subtotal:** $3,136,800 - **Distributions:** $1,000,000 - **Other decreases:** $ - **Ending capital:** $2,136,800 ### 3. Balance Sheet (Ending) - **Cash (ending):** $1,744,800 (after accounting for all transactions) - **Other assets:** Should be adjusted for purchases/sales. - **Capital accounts:** Each member: $2,136,800 / 4 = $534,200 --- ## Key Points - Use the correct **Section 179 limits for 2023**. - **Ending capital** and **cash** must be recalculated based on distributions, income, and transactions. - Always **verify IRS annual limits** and net income figures. - **No increases or decreases** other than income and distributions occurred in capital. --- Let me know if you need help with specific forms, calculations, or preparing Schedule K-1 for any member!