Are distributions received from a partnership reflected on your K1 or am I to report that income separately?

[CatinaT1]

This will be reported on your K1.

[Rick19744 · Accepted solution]

As a partner in a partnership it is your responsibility to maintain your tax basis in your interest.

Unless you know your tax basis, you will not be able to determine whether losses are deductible or if your distributions are taxable.

If you have tax basis in your partnership interest, distributions will not be taxable and not reported as income.

[rcabrasley1]

I guess let me clarify...
I receive a K1 from a partnership. The partnership paid out cash distributions for the year 2019.  Do I simply enter all the information from the K1 and my tax impact will be adjusted accordingly in turbo tax? I believe the total cash I received for 2019 is reflected on line 19 with code A.  Also reflected in section L with my tax basis figured.  So is this all I need to do in order to figure out what tax I owe on the cash distributions, or do I have to report that elsewhere on my personal income?

Thanks!

[Critter-3 · Accepted solution]

All you need to do is enter the K-1 information on the tax return.   What you are taxed on and what was actually distributed is usually not the same thing and should properly be reported on the K-1 along with the basis they calculated.  Keeping your own basis calculation is also a wise idea. 

[Opus 17]

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@rcabrasley1 wrote:

I guess let me clarify...
I receive a K1 from a partnership. The partnership paid out cash distributions for the year 2019.  Do I simply enter all the information from the K1 and my tax impact will be adjusted accordingly in turbo tax? I believe the total cash I received for 2019 is reflected on line 19 with code A.  Also reflected in section L with my tax basis figured.  So is this all I need to do in order to figure out what tax I owe on the cash distributions, or do I have to report that elsewhere on my personal income?

Thanks!

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If the business made a profit, that profit is reflected on the K-1 and is taxable, regardless of whether or not any of the profit was paid to the owners.  The payouts are not separately reported and are not separately taxable—the profit is taxed regardless of whose bank account it is in.

As @Critter-3 indicates, you do want to keep on top of the finances.  If the business has 4 equal co-owners, the profits are taxable 25% to each owner, even if one owner takes more cash out than the other owners.  There might be cases where this would be reasonable (such as, one owner is much more hands-on than the other owners) but you need to be aware of the arrangements and all owners should be in agreement in advance on what those arrangements are.