Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
jchazelwood
New Member

Schedule K-1 - I can't figure out why box 19 (Distributions) exceeds box 1 (ordinary business income). This is the first year for this entity, it doesn't make sense.

This is the first an only year of operation for this business, so I can't imagine why the distribution can exceed the income.  It doesn't make any sense.  The only thing this business ever had was cash and inventory, and now that the fiscal year is over, neither remain.  No inventory for a valuation (everything was sold) and no cash (everything was distributed to the partners).  I'm perplexed.

1 Reply
LudwigVan_fan
Level 7

Schedule K-1 - I can't figure out why box 19 (Distributions) exceeds box 1 (ordinary business income). This is the first year for this entity, it doesn't make sense.

Distributions are not necessarily tied to ordinary income.  Especially if the business goes out of existence.

Distributions can and usually will include distributions of capital accounts, as well as income account.

What you have to compute is whether distributions exceeded your adjusted basis in the partnership.  You may have potential gain/loss on the amount of distributions you received in relation to your adjusted basis.

Another item to watch for is any potential "hot assets" under IRC Section 751.

Here is a link for more information regarding partnerships

https://www.irs.gov/publications/p541


**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**
Dynamic AdsDynamic Ads
Privacy Settings
v