How to enter a change in ownership on Form 1065 in ProConnect Tax

Follow the steps below to enter a change in ownership calculated with a weighted average on Form 1065.

How to enter a change in ownership calculated with a weighted average:

1. Under the Input Return tab, select Partner Information.
2. Select Partner Percentages.
3. Enter the percentages for each partner in the Beginning and Ending columns. These should reflect the partner's ownership on the first day of the tax year and the last day of the tax year, respectively.

Follow these steps if the dates for the ownership changes are the same for all partners:

1. Under Partner Information, select Change in Ownership.
2. Select Alloc Override Dates.
3. Enter the beginning and ending dates for each change in the Periods available. These dates must cover the entire tax year.
   • For example, the partnership files a calendar-year return, and ownership changed at the end of June. For Period 1, enter a Beginning date of 1/1, and an Ending date of 6/30. For Period 2, enter a Beginning date of 7/1, and an Ending date of 12/31.
4. Select Back to Partner.
5. Select a partner using the available tabs.
6. Enter the partner's Percentage (xx.xxxxxx) (-1=none) for each period selected in step 2. You don't need to re-enter the period dates on this screen.
7. Repeat steps 4 and 5 for each partner.

Follow these steps if the dates for the ownership changes are different for all partners:

1. Under the Input Return tab, select Change in Ownership.
2. Under the Allocation Period Information section, enter the Beginning date and Ending date.
3. In Percentage, enter the partner's profit-sharing percentage for each allocation period in xx.xxxxxx format. If the percentage is zero for any period, enter -1. If the percentage is 49%, enter 49.000000.
4. Repeat steps 1–3 for all partners who changed or terminated profit-sharing during the tax year. If there's no change in ownership for a particular partner, no entries are needed for that partner.

Follow these steps to transfer capital when there is a change of ownership for a partnership:

If you are preparing a Partnership (1065) return where a partner has left the organization and you want to show a zero balance for their ending capital account on the K-1:

1. Go to the Balance Sheet, M-1, M-2 section and expand it.
2. Click on the screen Schedule M-2 (Capital Account).
3. Click in the Other increases (+)  field.  Click on the "+" to expand the input area.
4. Enter a Description.Note- A Description is required for Special Allocating the amount to partners (discussed later).
5. Enter the Amount.Tip- If you are trying to zero out the ending capital account for a departing partner, this amount should be equal to the ending capital account balance on the Partner's K-1.
6. Click in the Other Decreases (-)  field.  Click on the "+" to expand the input area.
7. Enter a Description.Note- A Description is required for Special Allocating the amount to partners (discussed later).
8. Enter the Amount.Tip- If you are trying to zero out the ending capital account for a departing partner, this amount should be equal to the ending capital account balance on the Partner's K-1.
9. Go to Special Allocations located at the top.
10. Select the line with the description entered for Other Increases from the left navigation panel.  (This should be the Description you entered on the Schedule M-2 screen (Step 3))
11. Allocate the increases to the Partners receiving the capital under the Allocation Amount column.After you have allocated the full amount of "Other increases" to the existing partners, continue to Step 12.
12. Select the line with the description entered for Other Decreases from the left navigation panel.  (This should be the Description you entered on the Schedule M-2 screen (Step 3).)
13. Click on the Description from the left navigation panel. (This should be the Description you entered on the Schedule M-2 screen (Step 3))
14. Allocate the decreases to the Partners selling/departing under the Allocation Amount column.Tip-  The full amount of decreases should be entered for a departing partner.

The departing partner's capital account on Form K-1 should reflect "0.00" and the remaining partner's capital account should increase by the amount entered on the Special Allocations.