Solved: I have a question regarding preparation of schedule L / Balance Sheet of a 1065 Partnership return.
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I have a question regarding preparation of schedule L / Balance Sheet of a 1065 Partnership return.

I have a question regarding preparation of schedule L / Balance Sheet of a 1065 Partnership return.  The partnership invests in stocks and mutual funds.  How is the appreciation of these assets accounted for on the balance sheet?  I assume it is a type of unrealized gain?

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Level 12

I have a question regarding preparation of schedule L / Balance Sheet of a 1065 Partnership return.

From a pure "Generally Accepted Accounting Practices" (GAPP) standpoint, if you mark to market your investment portfolio, (a balance sheet asset), then the offset would typically be an accounting entry to the P&L titled "unrealized gain/(loss)" and that amount would settle out on the balance sheet in the entity's "equity" section.  Assuming the partnership would not recognize unrealized gains and losses for tax purpose, i.e., the partnership is not a "trader' in the eyes of the IRS, then that unrealized gain or loss would show up as an adjustment in Schedule M-1 "Reconciliation of Income (Loss) per Books With Income (Loss) per Return"

Tom Young

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Level 12

I have a question regarding preparation of schedule L / Balance Sheet of a 1065 Partnership return.

From a pure "Generally Accepted Accounting Practices" (GAPP) standpoint, if you mark to market your investment portfolio, (a balance sheet asset), then the offset would typically be an accounting entry to the P&L titled "unrealized gain/(loss)" and that amount would settle out on the balance sheet in the entity's "equity" section.  Assuming the partnership would not recognize unrealized gains and losses for tax purpose, i.e., the partnership is not a "trader' in the eyes of the IRS, then that unrealized gain or loss would show up as an adjustment in Schedule M-1 "Reconciliation of Income (Loss) per Books With Income (Loss) per Return"

Tom Young

View solution in original post

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