Ok.. now I have a question if I could. I have a new 1065 client.. say they net $ 300,000 and there are three partners.. law firm. instead of each partner getting a k-1 for 100,000 they want the allocation of the $ 300,000 to be allocated differnently based on work each bought in, etc... does anyone know how to show unequal amounts on the three K-1s? thanks!
You (they) have to look at their partnership operating agreement. If that document specifies allocation then until they amend the agreement you should not oblige. S corporations cannot have disproportionate distributions or allocations. 50/50 owners must share profits and losses as well as distributions 50/50. Any change is done through salaries. But LLC's can have different ownership %, sharing of profits % and sharing of losses %. And the last two can be modified every year, again, as long as their operating agreement allows. In the K-1 Worksheet you can change the sharing of profits % and sharing of losses %, and you can also do a special allocation by $ amount or by ratio.
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