What is the difference between Cost Basis and Tax Basis (Form 1065)?

[Taxlax]

In K-1 (Form 1065) , Partner's capital account basis is , calculated on Tax basis.

Is it same as cost basis? I need to have cost basis as I sold my share of Limited Partnership.

[Rick19744 · Accepted solution]

In preparing a form 1065 K-1 the company has many options in presentation of the amounts reflected in Section L or your K-1.  Your facts indicate that "tax basis" is checked.

Your tax basis and capital account are two entirely different items.  As a partner in a partnership you need to track your basis in the partnership interest.  This determines whether a partner has basis to take losses, whether distributions are taxable or not and also provides the information in determining your overall gain or loss upon disposition.

Appears you have not tracked your basis.  However, since the K-1 indicates that it is prepared on a tax basis, you could use this amount as it should tie to any records that you should have been maintaining.

Now if you use this, it becomes tricky as it is important to understand whether any amounts reflected on the distributions line include any liquidating distributions.  So in conclusion, you have your tax basis on your K-1 which is necessary to determine your final gain or loss.

[Taxlax]

Thanks Rick. Your answer is most helpful. There is no distribution so it is not any more tricky.

[Rick19744]

So that would mean the following:
1) If your tax basis number is positive, then you have a capital loss
2) If your tax basis number is negative, then you have a capital gain

[mainhoon]

Rick, I am in a similar boat.. Just to be sure then, in Section L if I have current year increase, then I subtract it from the prior basis and vice versa? I don't have any distributions either and if this line encapsulates the net impact of all those myriad numbers in K1 then that would be of great help