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

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Overview

8.0 Credits
ONLINE

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. 

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.

Major Topics

  • 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)

Designed For

CPAs and tax professionals.

Prerequisite

General knowledge of individual and partnership income taxation.

Advanced Preparation

None.