How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask financeguru2 Your Own Question
financeguru2
financeguru2, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 136
Experience:  Several years of complex tax experience
45116828
Type Your Tax Question Here...
financeguru2 is online now
A new question is answered every 9 seconds

Can someone tell me the difference of partner's capital account

Customer Question

Can someone tell me the difference of partner's capital account calculated using tax basis vs calculated using 704(b) book? I saw 3 boxes on Sch K-1 line L. An example will be appreciated!
Submitted: 1 year ago.
Category: Tax
Expert:  financeguru2 replied 1 year ago.
704(b) book capital accounts are essentially book or financial statement capital accounts using tax rules. If there is property contributed with a different fair market value than its cost, GAAP capital accounts will record the contribution at cost, and 704(b) book will record the contribution at fair market value. From there on out, any book or financial statement activity will run through GAAP and 704(b) book capital accounts the same while taxable income/loss items will run through the tax basis capital account. Therefore, 704(b) is usually only applicable when real estate or some other appreciating/depreciating asset is contributed to a partnership. If cash is contributed, 704(b) and GAAP will equal each other.
Feel free to respond to me for further clarification if this does not fully answer your question before rating the answer. If I have fully answered your question, please rate the answer. Thank you.

Related Tax Questions