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Partnership data entry
We're using Turbo Tax Business for our father/son partnership and T.T. Deluxe for the partners' 1040's. This partnership was formed Jan. 1, 2016. I have a question regarding entering one of the partner's info. into T.T. Deluxe. Under the Federal Taxes 'Wage & Income' tab as I'm entering info. from our son's K1, one screen asks me, 'Enter Capital Account Information.' It asks for (1) Beginning capital account, (2) Capital contributed during the year, (3) Current year increase, (4) Withdrawals & distributions, & (5) Ending capital account.
Our son did not contribute capital at the beginning of the year. Cash withdrawals/distributions to him were entered in item (4).
If someone could help me out with items 2, 3, & 5 above, I'd appreciate it very much. Many thanks!
Also, on this screen I need to check either Tax basis, GAAP, Section 704(b) book, or other. Any tips on what I check here? Thanks again!!
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Business & farm
Your question is confusing as you are mixing TT Deluxe and TT Business in the same question. I will attempt to address what I believe are the issues:
- Your initial question is regarding information being entered into TT Deluxe (at least that is what is stated). The information you are asking about should be reflected on the respective K-1. All of this is determined at the partnership level. All of this should be detailed on the K-1 line L.
- Your second question should also be addressed on the K-1 in that same line L.
Also keep in mind the date of replies, as tax law changes.
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Business & farm
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Business & farm
Tax basis are books and records maintained in accordance with the tax laws.
GAAP are books and records maintained in accordance with generally accepted accounting principles.
704(b) are books and records maintained in accordance with the regulations under 1.704-1(b) and are extremely complicated but more in line with economic principles.
Other is exactly that - something different.
Also keep in mind the date of replies, as tax law changes.
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Business & farm
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Business & farm
Also, does it mean the amount on the line "ending capital account" is not the number I should use to calculate my basis in the company?
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Business & farm
In answering your first question - not necessarily. Section 704(b) attempts to track the economics of the partnership capital and is the cornerstone of the regulations dealing with partnership allocations. Included in this number could be assets contributed based on FMV and not adjusted tax basis. There could have been a book-up at some point and that would be reflected in this account as well.
In response to your second question, you need to be tracking your tax basis and adjusting it annually. Only by knowing your tax basis will you then know whether or not you are at-risk. Additionally, unless you know your tax basis, you will not be able to determine your gain or loss upon disposition of your interest.
The attached link will provide some general guidance on maintaining your tax basis.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/instructions/i1065sk1/ch01.html">https://www.irs.gov/instructions/i1065sk1/ch01....>
Also keep in mind the date of replies, as tax law changes.
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