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I am doing a cash flow spreadsheet and wondering where I would

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I am doing an Individual...
I am doing an Individual cash flow spreadsheet and wondering where I would find Cash Distrib from Partnerships. This is showing under my Cash Inflows. It says on my spreadsheet (Schedule E, K-1 1065 for $) I'm not sure what that means. Same for S corps distribustions this says (Sched E. K-1 1120-S for $)

This is showing in my cash outflows.
Also need to know where to find Cash Outlays on Partnerships (K-1, 1065) and Cash Outlays on "S Corps (Form 1120s) Thank you.
Submitted: 7 years ago.Category: Tax
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7/1/2010
Tax Professional: BK-CPA, Certified Public Accountant (CPA) replied 7 years ago
BK-CPA
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An individual cash flow spreadsheet is about the equivalent of a well labeled bank reconciliation, so I'm curious based on your purposes if you also have this spreadsheet tied to a personal statement of net worth and income statement.

 

In any case, if you are using the indirect method of preparing a cash flows statement, then you will be adjusting for the difference between cash inflows, outflows, and your beginning net income.

 

If you are doing your cash flows using the direct method, then you will simply record them as cash inflows and outflows accordingly, as your calculation starts with beginning cash as opposed to net income if using the indirect method above.

 

Your distributions are being shown for amounts withdrawn from the Partnership / S-Corp in the form of cash, property, etc. You should have received these amounts, say as in the form of a personal check written to you, or the form of a tax payment made on your behalf (common).

 

If you are measuring changes in net worth, then you will want to adjust your Partnership / S-Corp equity (and thus fair value after tax) calculations on your statement of net worth for each period, with amounts then showing up in the income statement, and as I said above the difference between income and cash flows shown in a cash flows statement using the indirect method.

 

Partnerships file form 1065 while S-corporations file form 1120S. Your Schedule K-1 is cut as a part of the above return (Schedule K-1 is used to report distributive shares of activity flowing through to the owners of partnerships, s-corporations, and trusts).

 

On Forms 1065 and 1120S, you can see the company balance sheet (Schedule L, look to pages 4 or 5). Here are forms 1065 and 1120S:

 

http://www.irs.gov/pub/irs-pdf/f1065.pdf

 

http://www.irs.gov/pub/irs-pdf/f1120s.pdf

 

Having that information might help you determine the company equity.

 

For each company, you have your personal basis in either your partnership interest / shares, which is generally not measured by cash inflows and outflows, but will also increase and decrease with the company earnings allocated to you (ie... meaning your basis changes with taxable income, as well as distributions and contributions of equity).

 

You need to keep track of your basis each year (or your accountant) to be able to tell if distributions coming from your entities are taxable as capital gains. If you have basis per above, you are not subject to additional taxes when distributing assets of a partnership or S-corp to yourself, generally speaking.

 

All that said, your situation is complex and to truly understand the relationship between your tax returns and your personal bookkeeping could end up being a $1,000 question or more even if you are someone like Warren Buffett. If there is something I can be more specific on I will, just let me know.

 

Thank you for your question.

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Customer reply replied 7 years ago

I am a new credit analyst, and preparing the cash flow stmt on our customers to see if they have enough cash flow to support the guaranty. For the customer I am working on now. I was wondering what line or schedule on 1065 do I find the cash distrib? Same thing for S corp 1120s? Where would I find it on the K1 and on the schedule E?

 

For the Cash outlays, I think I understand that is Schedule L, mortgage notes, bonds payable in less than one year or other Liabilities. Is this correct?

Tax Professional: BK-CPA, Certified Public Accountant (CPA) replied 7 years ago

Look to schedule K of the forms (K-1 too, but also 'K' of the 1065 and 1120S returns).

 

Schedule M-2 is a little more revealing for you then on a 1065 than it is on an 1120S.

 

Contributions of property can otherwise show up as increases in partner / shareholder payables or increases to capital accounts on schedule L (you cannot add an asset without also adding either a liability or equity to the books).

 

Honestly, trying to run a cash flows projection off of tax returns is like trying to turn water into wine in some ways, but I realize what you are doing is typical because there isn't a lot of better information for you to go on, so I digress in saying that you have a very tough job and good luck to you. If you are looking at multiple businesses and you are trying to assess the cash flow capabilities of the owner, one of the businesses, a group of the businesses and/or the owner together, etc., you're possibly going to have a tough time unless you are dealing with all profitable companies that are oozing distributions and taxable revenue...

 

Schedule E is concerned with the income, distributions might (but probably won't) trigger capital gains on schedule D, and the contributions won't show up on a 1040 generally.

 

Good luck!!

 

If there is something else I can clarify, I will.

 

Thanks again.

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Customer reply replied 7 years ago
Relist: I received an indirect answer to my question. I need direct clarification on this for Distributions & Outlays. .
I received an indirect answer to my question. I need direct clarification on this for Distributions & Outlays.
Tax Professional: BK-CPA, Certified Public Accountant (CPA) replied 7 years ago

There is no direct answer. Distributions and outlays can take many forms.

 

A distribution to the owner might show up as discussed above (Sck K, K-1, Sch M-2, Sch L).

 

An outlay can mean many different things, but what you are looking for is "contributions" and "distributions" to the owner. A business putting out money (or an outlay) for new buildings and equipment wouldn't show it on a tax return to the extent it doesn't show up on Schedule L and or depreciation information. A person putting out money (again, an outlay) for the benefit of a business is making a loan or capital contribution to the business (Schedule L, might not show up at all).

 

It's not easy.

 

Again, I'll continue to clarify for you.

 

Ideally, you need a consolidated set of financial statements (you're trying to generate this information from tax returns, which focus on income and expenses, but not assets and cash flows).

 

Thank you.

 

 

 

 

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Tax Professional: BK-CPA, Certified Public Accountant (CPA) replied 7 years ago

I thought of one last tip for you because it pertains to your question quite a bit I feel. Often times, contributions and distributions for any one given tax year and partner are netted for tax reporting purposes. The rules are a little different when it comes to partnerships and s-corps, but the principal can occur many times over for each company across different partners / shareholders, equity / debt, errors / omissions.

 

To summarize, that means: where you see distributions on the tax return it is likely that you are really looking at net contributions less distributions, a negative result being reported as a distribution on the return.

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Customer reply replied 7 years ago

Hi,

 

Thank you for all your info. I was told that I could find Distributions on the K1 line 16D or schedule E 1040 Line 17 on an S corp. For a partnership, line 19 of K1. Can you verify this? Thank you.

Tax Professional: BK-CPA, Certified Public Accountant (CPA) replied 7 years ago

Sure. Schedule E is right here, so lets check that one first (line numbers tend to change sometimes too, but schedules don't that often, so stick with memorizing schedules too if possible and what is on them):

 

http://www.irs.gov/pub/irs-pdf/f1040se.pdf

 

17 Utilities

 

 

ie... utilities expense isn't a distribution (generally, say fraudulently claimed for example - see lines 27 - 32 for the main info on partnerships and s-corps as it appears on a 1040).

 

 

 

....

 

 

 

 

Now let's check line 16 on the k-1 for an S-corp and 19 for a Partnership (you will see them there, yes, but we'll check the lines too - the 'D' after 16 I believe is for distributions too specifically yes, but these letters do change from year to year too like line numbers do... there are lists in the instructions):

 

http://www.irs.gov/pub/irs-pdf/f1120ssk.pdf

 

http://apps.irs.gov/pub/irs-pdf/f1065sk1.pdf

 

It looks like line 16D and 19 check out, and also perhaps under the heading L in the lower left for the partnership.

 

 

....

 

 

 

Your distributions and contributions are a lot easier for a partnership (schedule M-2 too, again). Distributions show up on an 1120S and the K-1, and perhaps on the 1040 as self-employment income (schedule C), capital gains (schedule D), or not at all because generally distributions are just non-taxable returns of capital. There is no direct answer, again, other than that distributions do not generally show up on Schedule E, at least not directly, no.

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