K1 - begining capital account

[gvanbooven123]

Hello, I have been doing taxes for a small farm inherited from my parent for  couple a years now.  There are 7 owners. We made it a LLC in 2017.  This year when doing the taxes in Turbo Tax Business I noticed a section that I have not done before. It is the K1 Sec L area referring to  Beginning Capital Balance where it is looking for an amount. There is no amount in the previous year K1. I have a checking account with funds to support the farm that was funded from my parents estate.  I am guessing that I did not enter this amount in previous years. I am not sure what to do. Looking for some help. It is a farm where we rent the land to a local farmer.

[Mike9241]

their beginning capital would not only be the pro-rate share of the cash but also of the farm assets net of any depreciation that should have been taken. 

[M-MTax]

I'd say you need a tax pro for this whole thing. Beginning capital account number would be the value each one of the 7 contributed to the llc or 1/7 the value of the farm. Then each year the accounts are adjusted for income, loss, distributions, withdrawals, etc. It's a lot of work and you need to know what you're doing. Use a tax pro.

[ThomasM125 · Accepted solution]

Section L on the partnership K-1 schedule represents each partner's equity in the partnership. Since your partnership has only be in existence a few years, you may be able to calculate the number.

Take each partner's original cash or value of property contributed to the business, add/subtract their share of income/loss for each year and add or subtract any cash or the value of property distributions or property contributed to the partnership. Do this through the end of 2019, and you will have the beginning balances to report on your 2020 tax return.

Turbo tax will automatically adjust the schedule once you report the correct beginning balances.

Schedule L will not affect the income or loss reported on schedule K-1, so it doesn't normally have any affect on the accuracy of reporting of the partnership income or loss on your personal tax return.

It comes into play if your equity in the business becomes negative, in which case you may not be able to deduct losses reported on the K-1 form. Also, when you dispose of your interest in the partnership, you need to know what your basis is to determine a gain or loss that may need to be reported on your tax return. The capital account balance can aid in determining your basis.

[gvanbooven123]

Thanks, very helpful.  Would I include the real estate value of the property in this calculation.  The only assets that I see would be the real estate value and the cash in the account.  There is a house and barn on the property but is not used by the farmer so I am no including any costs associated with them.  I used the same bank account to pay for the house  and barn maintenance that I use to deposit the income from the rental farmland.  This comingling of funds may be causing problems. 

[M-MTax]

The real estate value would be the ORIGINAL contribution from what you said in your question. You have an llc with multiple members with income, expenses, and depreciable property AND you clearly did not understand one word of what was written in the answers. You NEED a tax professional.

[AnnieMacGSP]

Having a similar issue, except I already know the capital account beginning balances for each partner.  (Am using Turbotax for this partnership for the first time; but have used the program for other partnerships for many years now.)  Should I make a dummy return for prior year so that transfer last year's ending balances so that it becomes their beginning of the year capital account balance?

[AnnieMacGSP]

Just to clarify, the program is not allowing me to manually input the beginning of the year capital balance for any of the partners on the Schedule k-1 worksheet, nor on each partner's schedule K-1.  

[DaveF1006]

Yes, this is a known issue and the CSI investigations team is working on it to resolve the issue. At this time, I don't have an ETA on when this will be resolved.

[AnnieMacGSP]

Thx for the reply.  btw I was able to do a work-around by doing a dummy return for the prior year (TY2020).  Then when transferring the old data, the capital balances transferred as well.  

[sms56]

I transferred in the 2020 turbotax with the capital account info but the 2021 return is not showing the beginning capital account balance on the K1's - the partnership does not have an exception not to report. 

Any ideas how I can enter the info?

Thanks  

[AnnieMacGSP]

Hmmm.  I had to enter in all the partnership info fresh and into a 'dummy' 2020 return.  The 2020 TT return asked for each partner's beginning capital account balance (unlike  the 2021 program).   I also saved it, naming it Dummy file.  Is it possible TT 2021 isn't transferring the correct file?  FYI, it was only when looking at the finished 2021 return that I could see the beginning and ending cap account balances for each partner.  If you look into File (as if you are done with your entries), you can preview to see the K-1s and see if the cap balances came thru.  

[AnnieMacGSP]

Also I looked into the worksheet for the Schedule K-1s and clicked the option re: Item L, to calculate the capital account adjustments.  Not sure if I needed to do this, but I did so anyway, and it was good.

[sms56]

Thanks but I did not want to re enter all the data again for 2020.  Found on a different thread a suggestion to go to the forms/worksheets and enter in the beginning balances by right clicking on the entry and using the override option to enter the values.  It worked.  Pain to have to do this though, the whole point of the program and transferring data is so that this happens automatically.  

[Eureka2022]

Doe anyone know if there has been any resolution to this problem. There is no support for the business product, and anyone you get on the phone is no help.