Problem NO: 26

Hoki Poki, a cash-method general partnership, recorded the following items for its current tax year:\nRental real estate income $2,000\nSales revenue $7

Hoki Poki, a cash-method general partnership, recorded the following items for its current tax year:

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Rental real estate income $2,000

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Sales revenue $70,000

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§1245 recapture income $8,000

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Interest income $2,000

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Cost of goods sold ($38,000)

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Depreciation – MACRS ($9,000)

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Supplies expense ($1,000)

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Employee wages ($14,000)

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Investment interest expense ($1,000)

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Partner’s medical insurance premiums paid by Hoki Poki ($3,000)

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As part of preparing Hoki Poki’s current-year return, identify the items that should be included in computing its ordinary business income (loss) and those that should be separately stated. [Hint: See Schedule K-1 and related preparer’s instructions at www.irs.gov.]

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