Reporting Tax Basis Capital Accounts on Partnership Tax Returns

Forum|Forum|5 years ago
January 18, 2021
1 reply
26 views

How do I convert the K1 capital accounts to tax basis without changing Schedule L and M2 from book basis?

Lacerte Tax

This topic has been closed for replies.

J

jphandy

Level 3

Hank:

The IRS is advising on their draft regulations and forms that Box L, Schedule K-1 will no longer tie to M2 and the balance sheet. They recognize and now expect that. In effect, you now have to maintain "tax capital accounts" separately from M2.

Since Lacerte always connected the numbers from M2 to flow to the balance sheet and Box L, they are working on the programing to "disconnect" those numbers in the program.

Additionally, the IRS advises a one time plug to beginning Box L, to covert old capital to the required "tax capital" account.

The IRS is considering a waiver for 2020 and Lacerte is working on the programming now.

Joe Handy

Lord Happy

Level 5

Happy day....after much argument in our office, which included staplers being wielded in threatening manners, I'd like to know the source for what you wrote. Can you link to it, please?

J

jphandy

Level 3

https://www.plantemoran.com/explore-our-thinking/insight/2021/01/partnership-tax-basis-capital-reporting-requirement-for-tax-year-2020

Beginning capital needs to be restated and for those partnerships with complex balances sheet capital accounts on Schedule L and M-2 will remain GAAP or 704(b).

The regulation only requires Sch K-1 to be presented on the "tax capital method"

Check the Instructions to Form 106 also.

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