Do i have to pay taxes on partnership income (UCO shares) that i did not realize yet?

[rajmirk]

I have bought some UCO shares in 2020, but never sold them. I was sent a Schedule K-1 (1065) after i had already filed my taxes, and the 1065 shows 0 (empty) in Box 1 Ordinary business income. But Boxes 8 (net short-term capital gain/loss) and 11(Other income) show positive numbers. Those correspond to the gains on paper that I have not realized yet, as I havent sold the UCO shares yet.

I have not sold any of my UCO shares - should i still pay taxes this year on them?

[Rick19744 · Accepted solution]

If you received a K-1, that means you invested in an entity that is taxed as a partnership.

A partnership is a pass-through entity and pays no tax at the entity level.

All income, loss, gain is passed through to the partner and any tax is paid at the partner level. 

You need to begin to maintain a tax basis schedule of your investment in this partnership as this will be critical in being able to determine if losses are deductible,  if distributions are taxable and ultimately your overall gain or loss upon your disposition of this entity.

Bottom line, "yes", you need to include these capital gain amounts in your 2020 tax return and pay any tax as a result of this income.  Generally partnerships make a distribution for partners to provide cash for any tax impact.  However, that is not always the case.

[rajmirk]

Thanks for the response.

[Rick19744]

You are welcome.

[bwong64]

Hello I also received a statement for UCO, form 1065.  However, my transactions were done in a rollover IRA and it's not supposed to have tax consequences.  Why am I still receiving this form telling me I have a gain?

Thanks!

[RobertB4444]

You need to discuss this with the broker who is managing your IRA.  If the K-1 that you have received is for activity inside your IRA it should not have been issued to you with your social security number on it.  If you have received a K-1 that is reportable income.

@bwong64