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Book to Tax Difference in notes attached to K-1

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Level 2

I have a partnership K-1 to enter onto an individual return.  Taxpayer is a limited partner.  In the notes of the K-1 there is the following language... "Schedule M-1 Adjustments.  Book to tax differences $581,830.   This must be income (right?) as it affects the ending capital account for 2019 and also appears as part of the current year income in that same right hand lower corner where the beginning capital account, Capital contributed and ending capital account are detailed on page 1 of the K-1.  Where do I enter this $581,830?  On what line of the MFJ 1040 should the amount show?  There is also a California return as well.  But there are no CA adjustments on this K-1.  Where should it show on the CA 540?  Again, this is passive income.  My taxpayers are limited partners.  Again, I can reconcile the K-1 if I include the $581,830 as income.  Just want to know where to enter it?  Does it matter as long as it's passive?  Help!!! 

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7 Replies 7
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Level 2

Oops i meant lower left hand corner, but you probably already surmised that!

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Level 12

Maybe I'm misunderstanding something, but ...

The boxes on the K-1 show the income for tax purposes.  That is what goes on the tax return.  It doesn't matter what the "book" income is as that does not affect the taxpayer's tax income.

In other words, you don't add that income on the 1040.

 

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Level 2

Thank you for your response. The information I am talking about is in the statements which follow the K-1 and are relevant  to reconciling the K-1 income on the tax return. My question is, where do I record this $581,830 worth of income which comes in the form of book to tax difference.  I am also assuming that because the taxpayer is a limited partner, this income will be passive.  Should I record this as box 11 other income?

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Level 12

As I said above, Book income is NOT entered on the tax return.  So if there is a statement showing the book income difference, that is mostly just for your information.

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Level 2

The thing is... The $581,830 is included in the Capital account analysis as current income... This $581,830 income item is in the statements attached to the K-1.  If it isn't income, why does it affect the capital account analysis under "current year net income"?

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Level 15

There are *new* reporting requirements for partnership K-1's.

This is likely the adjustment to conform to reporting the capital accounts to the new requirement.

TGB is correct, the income/loss/gains etc that are need for INCOME TAX return reporting are the amounts on the right side.  

Former Chump... umm.... AllStar.
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Level 2

Thank you, TGB... I’ll just adjust taxpayers’ capital account by entering the amount in the “increases” box in basis limitation section of K-1 screen.  Not putting it as income.  Thanks again....

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