@akk2 wrote:
Thanks, jtax. Super helpful.
I think I understand the basic logic of it now. Because PTP income is taxed differently from capital gains, the government wants the K-1 income reported as such and then the basis is adjusted so I am not double-taxed on that amount as a capital gain... I know, baby steps...
Yes, that is correct. Partnership taxation is very complex. And used for investments but also businesses (usually as LLCs or S-corps). A lot of rules are in place to avoid gaming the system.
Oh, one thing. You are correct about the 11C being capital gain. But the basis adjustment when you receive phantom income applies to any type of income, not just capital gain. If you actually receive the cash for the income your basis obviously does not increase, just like a dividend from a stock does not increase your basis. If you reinvest the income by buying more shares/units then it is the that purchase increases your basis.
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