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Business & farm
I respectfully disagree, I don't think this should run through M-1 or P&L. This approach, in affect, would erroneously increase (unrealized gain) or decrease (unrealized loss) the partners' M-2 capital accounts by the unrealized and untaxed income.
I believe it is more accurate to net the unrealized amount to the investment on Sch L to bring the asset back to cost. You might also use the "unrealized" like a contra asset account and net to the same results. I believe these approaches would result in accurately presented capital account.
Note, there will be exceptions for returns with M-3's, etc. but for a simple cash basis return this should work.
‎April 15, 2021
1:59 PM