Detailed Financial Analysis Report of Tax Evaders N’ Trouble (TNT)

This financial analysis report delves into the financial affairs of Tax Evaders N’ Trouble (TNT), a partnership firm specializing in tax return preparation, located in Chapin, SC. Established in 2010 and operating on a cash basis accounting system, the firm's ownership is divided among three partners: Al Sharky, Darth Tax Evader, and When in Doubt Deduct Dave Deducter. The report examines TNT's income statement and balance sheet for the year ended December 31, 2017, focusing on aspects such as depreciation methods, specifically the straight-line depreciation used for assets with a depreciable life of 7 years, and the calculation of capital gains or losses from investments like IBM stock. Additionally, the analysis includes a review of tax and interest payments, covering state and federal income taxes, real estate taxes, personal property taxes, and interest on home mortgages, providing a comprehensive overview of the firm's financial performance and position.

FINANCIAL ANALYSIS REPORT
This report is about the financial affairs of a Partnership Firm named “TAX EVADERS
N’ TROUBLE”, situated at 125 Shady Lane, Chapin, SC 29036. The firm functions as a
local accounting firm and specialises in preparing Tax Returns for its clients in the
USA. The firm’s Employer ID No. is 57-7429540 and it commenced business in 2010
and has been reporting its income on the CASH BASIS system of accounting.
The following are the details of the three partners –
S.No
. Partner’s Name Shareholding %
01. Al Sharky 35.00 %
02. Darth Tax Evader 35.00 %
03. When in Doubt Deduct Dave Deducter 30.00 %
The Income Statement and Balance Sheet of Tax Evaders N’ Trouble (TNT) for the
year ended 12/31/2017 is shown in the attached Excel Spreadsheet.
Depreciation in a Limited Partnership
TNT is a limited partnership entity as it has more than one person having an ownership
interest in the business. Each of the limited partners is entitled to TNT’s income,
expense and liability in direct proportion to his ownership percentage. Depreciation is
also an expense that is shown in the income statement of the limited partnership. In
combination with other expenses incurred by TNT, this is also subtracted from the
income of TNT to arrive at the business’s net income or loss.
Straight-Line Depreciation
Although there are several methods of depreciation which can be used by a limited
partnership such s TNT, the partners have decided to use Straight-line Depreciation
Method, the most common method of calculating the depreciation expense. TNT uses
this method on the basis of the economic life of an asset which is established by the IRS.

Any asset owned by a business which contributed to the effort of income earning by the
business is known as Depreciable Asset and is eligible for depreciation
treatment. Depreciable Asset includes real estate (such as office building), vehicles
used for official purposes, computers and office equipment, machinery and heavy
equipment. Depreciable asset items are assets intended for long-term use by the
business.
Asset Class 00.11 specified by the IRS contains Real Property with No Class Life,
Office Furniture, Fixtures and Equipment are given a Depreciable Life of 7 Years.
TNT is using the Straight Line Method of Depreciation using this life span for the assets
owned by the business and used for the purpose of generating income. Since the
business of TNT commenced with effect from 01/01/2010, the Depreciable Life of the
assets owned by the business and shown in its Balance Sheet ended their Depreciable
Life with effect from 12/31/2016. Hence, the business is not availing the depreciation
from this year onwards as no new assets were added to the business.
Capital Gain / (Loss)
1. IBM STOCK
Purchased 300 shares of IBM @ $120.00 per share = $36,000
After 3 years sold these shares @ 210.00 per share = $63,000
Gross Capital Gain = $27,000
Taxes & Interest Payments
1. State Income Tax (Estimated Payment) = $49,000
2. Federal Income Tax (Estimated Payment) = $250,000
3. Real Estate Taxes = $7,000
4. Personal Property Taxes on Vehicles = $1,000
5. Interest on Home Mortgage = $17,000