Partnership Preparation, Basis Calculations and Distributions: Form 1065 Schedule K & K1 Analysis

Description

Get up to speed quickly on partnership and LLC formation, as well as preparation issues and calculating a partner’s and LLC member’s basis. Take a line-by-line analysis of Form 1065 Schedule K and K-1 and how these items affect the partner’s or member’s individual income tax return. 

Highlights

• Emphasize any new legislative changes affecting partnerships and partners
• Review the Form 1065 to learn how income statement items get reported on the partnership/LLC tax return (i.e., page 1 versus Schedule K) and flow-thru to the partner/members on Schedule K-1
• Analyze the Schedule K-1 line-by-line and discuss where the items get reported on the individual’s Federal income tax return and how the items affect the partner/member’s outside basis
• Look at what relevant information related to the 3.8% net investment income tax needs to be reported to the partners/members
• Formation issues including the mandatory allocation of the §704(c) pre-contribution gain or losses back to the contributing partner/member
• The purpose of tax and §704(b) book capital account
• Reporting recourse and non-recourse debt on the Schedule K-1
• Tax ramifications and reporting of cash and non-cash distributions including disproportionate distributions of “hot assets”
• Overview of the §754 election for optional basis adjustments triggering §743 (transfer of interests) and §734 (distributions)

Objectives

• Be able to form a partnership and calculate its initial inside basis in the assets and partner’s outside basis in the entity.
• Prepare a basic partnership (Form 1065) Schedule K including reporting of cash and non-cash distributions.
• Determine how Schedule K items get allocated to partners/members on their individual Schedule K-1.
• Identify the three main reasons for calculating a partner's or member’s basis in a partnership/LLC.
• Calculate a partner's or member’s outside basis and determine if losses and deductions are limited on their individual income tax return.

Designed For

CPAs and tax professionals.