The sponsor of one of my investments has reported via K-1, the following information:
Box 5: 50,073
Box 11: 1,448 (Code A - Other portfolio income (loss))
Box 13: 13,817 (Code W - All other deductions from passthroughs)
Box 19: 37,704 (Code A - Cash and marketable securities)
Box 20: 51,521 (Code A- Investment income)
Pt II (Info about the Partner, Line L: 15,552 (Beginning Capital Account)
I raised a series of questions: How Pt II, L is reflected in my return as additional loss? Is that "operating" income (loss)? Or capital loss? If capital loss, I'm guessing it's not included in net income per se. If as loss properly deducted from current year income from boxes 5 and 11, how is that reflected? In either case, Pt II, L states that an explanation is to be attached, but none was provided.
I received the following response: "I am not a tax preparer, but my understanding from our tax accountant (and what other members are doing) is they are netting the amounts and simply reporting the combined amount (in your case, the $22,152) as a single amount as ordinary income. None of the amounts are capital items. The $15,552 adjustment (which is favorable for you) is simply a catch-up entry which zero’s out your capital account and is the result of you (and others) picking up book income which was ultimately distributed as promote (i.e., you picked up income in prior years before the promote calculation which is now being adjusted for)."
If the response is either correct or justifiable, it results in a better outcome. However, in either case, it's not clear how I would report the figures. If incorrect, is there anything I can do with the Box 13, Code W deductions?
Thanks in advance for your input.
