Note: On March 7 , 2019 the IRS provided temporary relief for partnerships unable to timely provide this information. See our article at this link.
An article published in Tax Notes Today on February 15 highlighted a change in the 2018 Form 1065 instructions that will impact partnerships reporting partners’ capital accounts on Schedule K-1 using other than tax basis capital account reporting.
The new instructions, found in the instructions for Schedule K-1, Item L in the Form 1065 instructions at page 30 reads as follows:
If a partnership reports other than tax basis capital accounts to its partners on Schedule K-1 in Item L (that is, GAAP, 704(b) book, or other), and tax basis capital, if reported on any partner's Schedule K-1 at the beginning or end of the tax year would be negative, the partnership must report on line 20 of Schedule K-1, using code AH, such partner's beginning and ending shares of tax basis capital. This is in addition to the required reporting in Item L of Schedule K-1.
For these purposes, the term “tax basis capital” means (i) the amount of cash plus the tax basis of property contributed to a partnership by a partner minus the amount of cash plus the tax basis of property distributed to a partner by the partnership net of any liabilities assumed or taken subject to in connection with such contribution or distribution, plus (ii) the partner's cumulative share of partnership taxable income and tax-exempt income, minus (iii) the partner's cumulative share of taxable loss and nondeductible, noncapital expenditures.Read More