Partnership K-1

[peggysioux]

Working on an individual taxpayer return with a partnership K-1. There is a discrepancy in the "Partner's Capital Account Analysis" for "Current Year Increase (Decrease) of $944 vs. income and loss items listed on K-1. After receiving permission from taxpayer, I spoke with CPA who handled partnership return and was told he did not know why there was a discrepancy but assured me that the entries on the K-1 for income and losses were correct. Basically he told me to disregard the "Partnership Capital Account Analysis". I was surprised by his response and was curious if other tax preparers has run across this issue.

Peggy Sioux

[AZUKHiker]

What was calculation basis for Capital Account

On the K1 what box was checked just below the capital account. If it was not "Tax Basis" then the capital account movements will not agree to the K1 entries.

[peggysioux]

Partnership K-1

On the K1 what box was checked just below the capital account. If it was not "Tax Basis" then the capital account movements will not agree to the K1 entries.

Tax Basis is checked.

[Uncle Sam]

I find that usually, when there's a discrepancy between beginning and ending capital balance on Tax Basis, that is due to changes in the investment during the year (change in "units") - where units were either bought or sold that don't get reflected on the K-1 and if a sale, comes from 1099-B information - unless it's a private partnership.

[peggysioux]

Partnership K-1

I find that usually, when there's a discrepancy between beginning and ending capital balance on Tax Basis, that is due to changes in the investment during the year (change in "units") - where units were either bought or sold that don't get reflected on the K-1 and if a sale, comes from 1099-B information - unless it's a private partnership.

It is a private partnership and an asset was sold during the year. However, I would have thought that the income/losses listed from line 1 through 13 would total to the same amount as what is shown in "Current Year Increase (decrease) in the analysis. His percentage of profit did not change in 2016. Why would a sale not be reflected on K-1 but affect his capital account? Just trying to get a clear picture.

Peggy Sioux

[Uncle Sam]

I was referring to a change in ownership interest of the entity. Selling units of the entity would not show up on the K-1 but would effect the capital balance.