Reporting Partnership K-1s on Form 1040: Tax Basis Capital, Built-In Gains, and Step-Ups

Although practitioners have grasped many of the changes to Schedule K-1 (Form 1065) resulting from the recent tax reform, the IRS continues to make significant changes to this schedule. Negative tax basis capital reporting is now required, built-in gains and losses are included, and Section 743(b) basis adjustment amounts have been added to the K-1. These are only three of the multiple changes made recently to this schedule.

Even in the past, correctly reporting K-1 activity was challenging. To some degree, the changes are welcome, providing tax professionals with information that some felt was necessary and lacking. Accurately reporting the information from a K-1 is critical to correctly calculating a taxpayer's taxable income, carryforwards, and basis.

Each of the lines and respective amounts represents a separate reporting obligation. Line 20, Other Information, can be particularly troubling and now includes 23 reporting options from A to AH.

Listen as our panel of experts reviews the changes made to Schedule K-1 for flow-through entities due to tax reform and the latest changes made to the schedule. They will explain the significance of each box and where and how to report each on the taxpayer's Form 1040.

1. Income items, Lines 1-11
2. Deductions and losses
3. Other reporting items
4. Section K: recourse, nonrecourse debt, and QNR liabilities
5. Capital account reporting
6. Additional reporting obligations

The panel will review these and other vital issues:

• Recent changes made to Schedule K-1
• Reporting differences based on liability type
• Where to report box 11, Other Income (loss) items on 1040
• The effect of tax basis capital balances on 1040 reporting

Learning Objectives

After completing this course, you will be able to:

• Ascertain the new Form 1065 and Schedule K-1 reporting requirements
• Recognize the requirements for meeting the tax basis capital provisions
• Establish that the at-risk rules are complied with and that the reporting is correct
• Determine that IRC 743(c) basis adjustment amounts are correctly calculated and reported
• Identify the impact of the new IRC 163(j) business interest limitation rules
• Ascertain that tax basis capital balances are also reported for purposes of Form 1040

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).