ThomasM125
Expert Alumni

Business & farm

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.

 

 

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