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Reportibg Partners' Basis on a K-1

hrrisoncpa
Level 3

Re. the new requirement to report Tax Basis Capital on K-1's:  Is it the partner's OUTSIDE basis that's required?

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sjrcpa
Level 15

Considering potential penalties (although waived for 2020) I think you owe it to yourself and your clients to do your own research. Come here for clarification if you need it.

If you do it wrong, a valid defense is not "someone on the Intuit community said this is how to do it"


ex-AllStar

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sjrcpa
Level 15

No. Tax basis capital account computed with partnership numbers.


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hedgeslaw
Level 3

The new partnership basis reporting uses their outside basis. If the partnership has never added or lost partners, then the book value of the capital account (inside basis) and the outside basis (cost basis) will be the same. However, if there have been partners added or lost, the book value of their capital accounts and their outside basis will be different, unless they sold or bought at book value. So under the new reporting, if there have been ownership changes, the outside basis will need to be provided by the partner, as the preparer will not know this amount. JEEZ LOUISE.

The IRS is not going to penalize mis-reporting of basis for 2020 returns. However, next year the penalties are slated to start being assessed.

IF THIS ANSWERS YOUR QUESTION, PLEASE MARK IT ACCEPTED SO OTHER CAN FIND IT QUICKLY. THANKS.

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hrrisoncpa
Level 3

Confusing.  One response says, No, don't use outside basis.  Next response says, Yes, use outside basis.

I agree that if the partnership has never added or lost partners then, in general, the Capital Accounts would be equal to outside basis.  BUT, if there had been purchases and sales (and more likely than not the purchases were NOT at book value) the outside basis would not be equal to the Capital Accounts.

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sjrcpa
Level 15

You are also assuming books and capital account were maintained on tax basis.


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sjrcpa
Level 15

@hrrisoncpa Yes it is confusing. Do some research yourself, such as what IRS has decreed, and don't rely on strangers on the internet.


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hrrisoncpa
Level 3

I guess I misunderstood the purpose of this forum.  I thought it was to save fellow professionals some time.  Sorry.

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sjrcpa
Level 15

Considering potential penalties (although waived for 2020) I think you owe it to yourself and your clients to do your own research. Come here for clarification if you need it.

If you do it wrong, a valid defense is not "someone on the Intuit community said this is how to do it"


ex-AllStar

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