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Schedule K-1, the Internal Revenue Service (IRS) tax form issued annually for investment in partnership interests, is awaiting finalization of changes that could impact 2019 tax reporting. Schedule K-1 is used to report each partner’s share of the partnership’s earnings, losses, deductions, and credits. Under the current expectation that the new form will be finalized by the IRS in December 2019, individual partners or shareholders (of a partnership or S corporation) are being advised that the compliance process for filing may be more complex and time consuming for the upcoming filing deadlines.
How Much Change Can You Expect?
The amount of change needed is dependent upon the current tax basis status of capital accounts, and whether a switch to tax basis (of every asset) is needed, and the amount of preparation required for compliance – taking into consideration the basis of contributed property and its fair market value, for example.
What’s involved in a Tax Basis Analysis and Conversion?
From a high-level standpoint (your tax advisor will comb through the details on your behalf), and assuming the current draft forms by the IRS are finalized without change, it will be necessary to evaluate:
Contact a K·Coe tax advisor for questions on applicability, and expert guidance surrounding tax basis compliance and reporting.
- Each partnership’s balance sheet, and identify non-cash assets that were contributed to the partnership by a partner (as opposed to being purchased by the partnership)
- The tax basis of each property that was contributed to the partnership by a partner
- The fair market value (as of the date of contribution) of each property that was contributed to the partnership by a partner
- The date on which each property was contributed to the partnership by a partner