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Partnership K-1 Question

Technical topics regarding tax preparation.
3-Sep-2021 4:01pm
I have a new client that received a small K-1 from a partnership he invested in that was also a final-year K-1. From what it looks like, the partners capital section on the K-1 is on tax basis.

The K-1 beginning capital amount was negative $1,400. My client was allocated $2,075 of income and had $2,185 of distributions, which left his K-1 ending partner capital account negative $1,510. Strangely, the other partners ending K-1's are postive and combine to net the ending capital accounts to -0-.

It appears we have $110 of distributions in excess. I'm also not sure what to do about the negative capital amount, especially since it nets to -0- with the other partners positive K-1 ending capital amounts. Do we have a capital loss? Do you ignore it due to the small amount? I've never seen this before.

Any input would helpful!

22-Apr-2014 3:06pm
WA State
One, it should (almost) never end up that way. The preparer of the 1065 was likely unaware of how to close it out properly.
Two, it seems you've not determined what your client's opening balance was. When you follow his/her beginning basis through with current year activity, you'll see whether there is additional basis for a capital loss or whether you have distributions in excess of basis.
Their allocated debt will be the key to this exercise.

30-May-2014 7:38am
Sounds like your guy has a gain while the other partner has a loss… probably due to disproportionate distributions in the past.

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