I received a K-1 for a partnership where: 1) the shares are unvested 2) I filed an 83b and 3) there was no distribution. Do I do anything with K-1 or is it just reference

Is it correct that because of the 83b election, until shares vest and are sold as capital gains, any K-1 would just be for reference and not filed with my tax return?

1881

Level 13

Mar 17, 2021 5:43:10 PM

This is a complicated area and I recommend that you get some professional tax advice so you understand the tax ramifications.

Having said that, a few comments:

Your facts are extremely limited, but I am guessing that you received a profits interest in the partnership.
In general, receiving a profits interest is not a taxable event if it falls in line with the safe harbors issued by the IRS.
Receiving a profits interest that vests over time is not uncommon
However, if you make a timely Section 83(b) election (as you indicate you did in your facts), you are notifying the IRS that you are immediately treating the receipt of a profits interest as a taxable event. The receipt of this profits interest is taxed as ordinary income. You no longer have a vesting period.
Any K-1 activity reported to you MUST be included on your form 1040 Schedule E.

New Member

Mar 17, 2021 8:19:23 PM

To clarify, I was awarded unvested common shares in a partnership, not profits interest.

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I received a K-1 for a partnership where: 1) the shares are unvested 2) I filed an 83b and 3) there was no distribution. Do I do anything with K-1 or is it just reference