Solved: How should a partnership report a distribution to a partner when they leave?
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aj_techman
Level 1

How should a partnership report a distribution to a partner when they leave?

I am part of a four-member partnership - with equal shares (25%) of ownership.

This year (2018), one of the partners left and was immediately replaced by a new member.

We decided to pay the leaving member 25% of the equity in the business at the time of his departure (based on the balance sheet as of his last date of participation).

How should that payment be reported (by the partnership) for tax purposes?

It's not a guaranteed payment, and I don't believe it's a deductible expense.

  1. Should this be reported on a 1099-DIV to the partner, or on box 19 of the K-1 (or somewhere else)?
  2. In either case, where do I enter those amounts in TurboTax Business?  (I don't see any way to enter K-1 box 19 information.)
  3. To make things more complicated, the business hasn't yet cut the check for this amount; so we will accrue the expense and then actually pay the partner in 2019.  How does this affect the tax reporting?  (The business recognized the expense in 2018, but the partner won't receive income until 2019, so a 1099-DIV seems out of place.)
1 Best answer

Accepted Solutions
TomYoung
Level 13

How should a partnership report a distribution to a partner when they leave?

Partnerships don't issue 1099-DIVs.

Go back into the "Business Info" tab and select "Partner/Member Information".  Work through that until you come to the "Partner Capital" page (pic below) and enter the necessary information. 

You won't " accrue the expense" because it's not and "expense", it's a "distribution".  Assuming that the partnership uses cash basis accounting this transaction is a 2019 transaction.

Tom Young


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6 Replies
TomYoung
Level 13

How should a partnership report a distribution to a partner when they leave?

Partnerships don't issue 1099-DIVs.

Go back into the "Business Info" tab and select "Partner/Member Information".  Work through that until you come to the "Partner Capital" page (pic below) and enter the necessary information. 

You won't " accrue the expense" because it's not and "expense", it's a "distribution".  Assuming that the partnership uses cash basis accounting this transaction is a 2019 transaction.

Tom Young


View solution in original post

aj_techman
Level 1

How should a partnership report a distribution to a partner when they leave?

Thanks so much, Tom.  The screen shot helps immensely.  This is exactly what I was expecting, but I can't seem to get to that screen.  The Member Summary page says "Select Edit if you need to enter... Distributions of cash or property to members", but I never get taken to a page to do that.  Weird.  I may need to reach out Intuit support on that.

The Partnership uses accrual accounting, which is why I assumed we'd accrue the expense / distribution - so that the value of the business at the end of 2018 shows that we have an outstanding liability to this partner.
TomYoung
Level 13

How should a partnership report a distribution to a partner when they leave?

You should be able to click right through that interview to get at that page.  It's right after the "Enter Partner Percentages" page.  It sounds like you might be over in the "Balance Sheet" interview somewhere.  
aj_techman
Level 1

How should a partnership report a distribution to a partner when they leave?

Thanks again, Tom.  Turns out I'm not the only one experiencing this problem.
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4625191-unable-to-get-the-partner-member-capital-screen-in-turbota...>
TomYoung
Level 13

How should a partnership report a distribution to a partner when they leave?

Ah... One of those TurboTax glitches that only affect an unlucky few!
numberoneplanners
New Member

How should a partnership report a distribution to a partner when they leave?

Has this issue been resolved?  I'm working on 2019 taxes and still finding no option to enter a former partner's distributions.

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