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R. Klein, EA
R. Klein, EA, Accountant
Category: Financial Software
Satisfied Customers: 3375
Experience:  A member of the Intuit Ask a Tax Expert team and 10 years as QuickBooks Certified Pro Advisor.
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Tracking private investment in QB. I have Company A that invested

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Tracking private investment in QB.
I have Company A that invested some money into Company B.
In QB for Company A I entered the invested money as new account "Investment in Company B", type=Other Asset. This seems to be ok.
Now Company B made dividend distributions throughout the year 2012 to Company A and then in 2013 issued a K-1 to Company A showing actual profit. Assume sum of distributions was $100, and the actual profit on K-1 was $150.
How do I enter the distributions and then the number from K-1 in my Company A QB?

R. Klein, EA :

Thank you for your question regarding QuickBooks

R. Klein, EA :

First, what type of entities are Company A and Company B? I'm guessing B is an S-Corp, but what is A?

Customer:

Both A and B are LLC. A is taxed as S-corp (form 1120S), B is taxed as partnership (form 1065)

R. Klein, EA :

In this case, for tax purposes, income in B is passed-through A to you, if you are A's 100% owner

R. Klein, EA :

Nothing gets added to A. The distribution goes to you personally.

R. Klein, EA :

Your inside basis in B is increased by the $50 not distributed. Your outside basis does not change.

Customer:

No, A is only 90% owner.

R. Klein, EA :

A is a 90% owner of B, then the full amount of the K-1 for A gets passed to the owner of A, assuming A is 100% owned by you.

R. Klein, EA :

Assuming A is in its own company file in QB and not mixed in with anything else, then:

R. Klein, EA :

record the $100 as Other Income on the books of A. It is non-operating income.

R. Klein, EA :

It is reported on A's K-1 to you as the shareholder.

Customer:

Just to make sure this is not a typo: B reports $150 on its K-1 to A. $100 is the actual distributions that B made to A throughout the year. Does A report $100 or $150 on its K-1 to me?

Customer:

Yes, A is in its own company file in QB and is not mixed with anything else

R. Klein, EA :

Well, we do want to get technical here.

R. Klein, EA :

So, $150 is the INCOME, and it all passes through to the shareholder.

R. Klein, EA :

Therefore the income is 150 in Other Income. However, only $100 goes to cash account if actually received; the rest goes to your equity in B.

R. Klein, EA :

Yes, that's better accounting.

R. Klein, EA :

On your personal return, you will effectively recognize the full $150 income even though the cash might stay in the corporation

Customer:

So how do I book the $100 actually received? Goes to cash account, ok, but what category do I assign to it?

Book as follows:

in your checking account, record a
DEPOSIT to Checking + $100
Split the category for the balancing transaction
$150 to OTHER INCOME
-$50 to equity in "B"

if this is a General Journal entry
Debit Checking 100
debit Equity in Investment B 50
credit Other Income 150



Customer: replied 3 years ago.

Thanks. Last question: what type of account should be Equity in Investment B?

It is an OTHER ASSET. It should contain your initial investment in B in this account's balance, too.
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