Feeny University, LLC serves as tutors and instructors for college students in the Philadelphia area. Relevant information is as follows:
The following information was taken from the LLCâs 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 itâs 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 Feenyâs 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 firmâs activities do no constitute âqualified production activitiesâ for purposes of the §199 deduction. On January 1, 2016, the membersâ 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.
Feenyâs 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
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