Investment K-1 Received with disbursed non cash assets that were not received until the following year?

Forum|Forum|4 years ago
February 16, 2022
15 replies
95 views

Hi! My client received a K-1 from a fund that they had invested in. The K-1 had a 19C Distribution noted. This was a K-1 received in 2020. Please note, this distribution was never made in 2020, and only occurred in 2021; as a non cash distribution of shares. The amount noted on the K-1 was for the original cost of the shares. I need some help better understanding 2 questions:

1. Should we have gotten a K-1 with this distribution noted even though it was not actually transacted until 2021? Should we be requested a revised K-1?

2. If in fact we should have received this K-1, would I put this as a cash receivable? Or, just a current asset?

I am taking over a clients account and the CPA that had been working on it did some things I have never seen before, so I just want to be sure before I fire off any e-mails that I fully understand, and have clear and concise resources.

Anonymous_

Level 15

This just involves a basis adjustment.

See https://www.irs.gov/instructions/i1065sk1#en_US_2020_publink11396nd0e3908

FLAnneAuthor

Level 2

Hi! Thank you! I totally agree with the basis adjustment issue. However, I am more confused with the offsetting account they used for the basis adjustment. They put the basis adjustment of the Investment to a cash account, linked to the bank account as a sub account, and called it shares receivable. I would think it should be put against just a basic AR current asset. Especially since this was never a cash transaction, it was only a non cash, share transaction.

Also, the transaction did not occur until the following year, so I am wondering if the form was completed accurately? I have seen plenty of K-1's, but never one where distributions are disclosed prior to occurance.