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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11140
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Which boxes on schedule k-1 (Form 1065) should be added

Customer Question

which boxes on schedule k-1 (Form 1065) should be added together to equal the amount in Part II Section L Partner's capital account analysis Current year increase (decrease)?
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: Which boxes on Schedule K-1 (Form 1065) should be added together to equal the amount in Part II Section L Partner's capital account analysis current year increase (decrease)?
JA: Is there anything else important you think the Accountant should know?
Customer: no
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Submitted: 8 months ago.
Category: Tax
Customer: replied 8 months ago.
I have amounts in the following boxes: 1, 2, 5, 9a, 9c, 10, 11A, 13H, 13K, 18C, 19A, 20A
Customer: replied 8 months ago.
Is Lane the accountant to whom I have been assigned?
Expert:  Lane replied 8 months ago.

It's not that simple.

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The beginning capital account value comes from the previous year's ending value.

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Capital contributed during the year would be any money the partner put into the business and is an addition to the account value.

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The current year increase or decrease line will be the partner's share of the profits or losses for the year. ( Any draw or distributions paid to the partner reduce the capital account value.

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The year-end capital account value totals the additions and subtractions compared to the previous year's value

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So VERY generally, Ordinary income or loss - box 1 - (increas and decrease, respectively), Contributions (which aren't ON the K-1 anywhere else), and distributions, (line 19).

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However, there are a multitute of adjustments that may come to play, depending on the nature of the business.Depreciation on the return but not onthe books (difference in GAAP and tax), inventory write-downs, other gain-loss on the books but no tax items, cost of goods sold adjustments, etc.,etc

Customer: replied 8 months ago.
1. 356
2. -7,365
5. 3,049
9a. 20,090
9c. 199
10. -9,015
11a. 3,689
13h. 2,082
13k. 7,244
19a. 13,704
20a. 6,738which combination of the amounts above are needed to achieve a current year income (decrease) amount of -553?
Expert:  Lane replied 8 months ago.

If you have a really good feel for contributions and these adjustment items, we can talk this through, but In wouldn't answer the question simply by looking at other items of the K-1.

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Again the only truly relevant lines are 1 and 19, everything else is a breakoutn of, or adjustment to, that OR isn't on the K-1 at all

Expert:  Lane replied 8 months ago.

OK, first line 19 with a code of A does mean that there was a distribution of partners capital for this partner so a definite decrease

Customer: replied 8 months ago.
Lane, the amount of distributions reported in box 19A exactly match the amount reported in Part II Section L on the line labeled "Withdrawls and distributions".
Expert:  Lane replied 8 months ago.

Thats right

Expert:  Lane replied 8 months ago.

That's what I'm telling you Business income (line 1) and line 19(if the code is A, A is not part OFn thenline number) are the primary increases and decreases

Customer: replied 8 months ago.
Lane, I need your assistance with understanding how the value of -553 was derived for current year increase (decrease) based on the amounts reported in boxes 1 - 20 that I earlier provided.
Expert:  Lane replied 8 months ago.

you havent' provide enough information

Expert:  Lane replied 8 months ago.

you need more (capital contributions, for example) than what's on the other lines of the k-1

Customer: replied 8 months ago.
Lane, I provided all of the amounts reported in Part III for boxes 1 - 20. What additional information do you need?
Customer: replied 8 months ago.
Lane, there were no capital contributions made during the year.
Expert:  Lane replied 8 months ago.

capital contributions ... essentially the balance sheet of the partnership

Customer: replied 8 months ago.
Lane, I'm asking for your assistance with how the amount of -$553 was derived on Part II, Section L on the line labeled "Current year increase (decrease)". All other amounts are correct on the K-1.
Expert:  Lane replied 8 months ago.

you eed the INDIVIDUAL capital accounts of the partners ... you also need the partnership agreement to get capital allocation formulas .. for example

Customer: replied 8 months ago.
Lane, I have all of the K-1s for all of the partners. You are answering in non-specific "big picture" terms. I fully understand your responses but they are not at all assisting me with obtaining the answer to the question I submitted online. Do you want to give up and we reach mutual agreement that you were not helpful with answering the question submitted?
Expert:  Lane replied 8 months ago.

I'm opting out now... I don't seem to be able to help you understand that more is needed than simply the other lines on the K-... not only is the full 1065 needed, you need to analyze the balance sheet of the partnership ... especially as it relates to partner's capital account transactions throughout the year

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You are GREATLY oversimplifying AND have made some flawed assumptions about what the capital account analysis is doing and where the information comes from to do that

Expert:  Lane replied 8 months ago.

The question you've submitted CANNOT be answered with only the information you've provided

Customer: replied 8 months ago.
with 100% satisfaction guaranteed, am I correct that my credit card won't be charged?
Customer: replied 8 months ago.
Lane, how do I end this session and be guaranteed my credit card won't be charged?
Customer: replied 8 months ago.
since Lane referred me to a new tax professional, how do I "opt out" as an unsatisfied customer of justanswer.com and receive a confirmation that my credit card will not be charged?
Expert:  Lane replied 8 months ago.

No, I opted out .. I was just checking back in to see if anyone else had picked this up... and they have not.

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Again, all that's need for the analysis generally is the beginning capital account balance (not ON the k-1), additional capital contributions during the year (not ON the k-1) profit (line 1), distributions (line 19 with code a) and you get to ending capital account balance.

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The capital account analysis is simply a running total of the partners capital account. the various amounts on the k-1 all go to different parts of the partner's 1040, but the line L analysis is just beginning balance plus profits, minus distributioins.

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Other than a few adjustments, only two of the line items in the analysis come from the K-1 (current year increas or decrease - line 1) and distributions (line 19)

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If you'll go get the partners capital account transactions I can answer the question. Otherwise you're asking a question that cant be answered with the information you've provided. ... I've stilll opted so

Customer: replied 8 months ago.
Lane, the current year increase (decrease) amount reported on the K-1 of -$553 is not equal to the amount reported in line 1 Ordinary business income (loss) of $356.Your response above stated "Again, all that's need for the analysis generally is the beginning capital account balance (not ON the k-1), additional capital contributions during the year (not ON the k-1) profit (line 1), distributions (line 19 with code a) and you get to ending capital account balance."That's the essence of my question. I am not attempting to tie out beginning capital (because it is correct and matches the ending capital on the prior year K-1), nor withdrawals and distributions because they match the amount report on the K-1 of $13,704 nor the ending capital account. I'm simply asking what would cause the current year increase (decrease) not to equal the ordinary business income (loss) reported in Part III box 1. Your thoughts?Jim
Expert:  Lane replied 8 months ago.

My BEST guess here is that the person preparing the K-1 did it incorrectly, trying to allocate capital gains (which would have been passed to the partners schedule D) maybe? or taking some other path that was incorrect.

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As I've already mantioned, the capital account analysis can ONLY be done by looking at the debits and credits TO the capital account for THIS partner.

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A reconciliation using only k-1 items is impossible, MIGHT be possible in some scenarios, coincidentally, but never a guarantee, until you look AT the capital accounts.

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The balances of the capital accounts are reported in the owner's equity, partners' equity, or stockholders' equity section of the balance sheet, depending on the entity type.

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Again, I've opted out of this ... this question is severely underpriced for the time it would take to do the analysis correctly. Good luck wiith it.

Customer: replied 8 months ago.
The correct response for future reference is to advise your clients to obtain the Schedule K-1 Analysis of Partner's K-1, Current Year Increase (Decrease) Worksheet.In today's scenario, each of the amounts in Part III which I provided you earlier this afternoon are included in the "current year increase (decrease)" amount except for amounts reported in box 19a (distributions) and box 20a (other information). In today's scenario, there were five general ledger expense accounts which were represented in box 13w (other deductions) with the reference "STMT". In addition, schedule M-1 non-deductible expenses also affected current year increase (decrease) and were represented in box 18c (tax-exempt income and nondeductible expenses) with the reference "STMT".So by taking each the amounts reported in boxes 1 - 18 on the K-1, and obtaining the amounts referenced by "STMT" in boxes 13w and 18c respectively, the calculated amount exactly matches the amount reported on the K-1 as "current year increase (decrease).Case closed (resolved using my own initiative and insight).
Expert:  Lane replied 8 months ago.

Good for you .. I think if you'll look back at my instructions, you'll see that your analysis agrees with my instruction.

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Although the worksheet is one (left brain) way to get there, what I've said is accurate, and potentially more thorough.

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Once cannot DO the worksheet without the informationI was asking you for all along.

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Maybe for a little "connecting of the dots, now you look back at my very first posting.

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The partnership capital account is an equity account in the accounting records of a partnership. It contains the following types of transactions:

  • Initial and subsequent contributions by partners to the partnership, in the form of either cash or the market value of other types of assets
  • Profits and losses earned by the business, and allocated to the partners based on the provisions of the partnership agreement
  • Distributions to the partners

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The ending balance in the account is the undistributed balance to the partners as of the current date.

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For example, if Partner Smith originally contributed $50,000 to a partnership, was allocated $35,000 of its subsequent profits, and has previously received a distribution of $20,000, the ending balance in his account is $65,000, calculated as:

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$50,000 initial contribution + $35,000 profit allocation - $20,000 distribution

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If you understand this superstructure, you'll always be able to reality check the information

Expert:  Lane replied 8 months ago.

P.S.

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I;m really glad you got there