After one partner transferred ownership to a new person, beginning and ending % share of profit and loss appear correct on the K-1 worksheet, but wrong on the K-1

Forum|Forum|7 years ago
June 5, 2019
4 replies
31 views

At the beginning of last year, one member in my LLC transferred ownership to a new member. I've included both in the list of members. I set the percentage of ownership, profit, and loss to beginning 20% and ending 0% for the old member, and to beginning 0% and ending 20% for the new member. On the Sch K-1 Wks, it appears correct.

However, on the Schedule K-1's for both members, it shows as beginning and ending 20%. The dollar amounts listed in Part III ("ordinary business income (loss)", etc.) are accurate.

This looks like a bug? Should I just override the fields to correct it, or am I missing something?

TurboTax Business Windows

Best answer by Rick19744

I believe you asking a familiar question on K-1 presentation when a member terminates their interest.

See the following from the instructions of the schedule K-1:

If your interest terminated before the end of the partnership's tax year, the partnership will have entered, in the Ending column, the percentages that existed immediately before termination.

If your interest commenced after the beginning of the partnership's tax year, the partnership will have entered, in the Beginning column, the percentages that existed for you immediately after admission.

Based on the above, I believe the presentation is correct for both.

While the presentation may appear contrary to what we would think it should look like, the IRS wants a different presentation. The key is to make sure that the allocation in Part III is accurate, and I imagine it is.

Anonymous

Are your profit percentages different than your ownership percentages in the operating agreement? That's what section J is for. There's no bug for partnerships, but I might be able to help you with more information.

thinkinginkAuthor

Level 2

No, all three percentages are identical for each member. Here are screenshots showing what I mean. They're both for the same member, who started out with 20% ownership and ended with 0%.

Worksheet: <a rel="nofollow" target="_blank" href="https://www.dropbox.com/s/gonxc2fe87h3b0l/2018-02-25-k1%20worksheet.PNG?dl=0">https://www.dropbox.com/s/gonxc2fe87h3b0l/2018-02-25-k1%20worksheet.PNG?dl=0</a>

Schedule K-1 part 2: <a rel="nofollow" target="_blank" href="https://www.dropbox.com/s/vqb91fwwhpjbc62/2018-02-25-k1%20part2.PNG?dl=0">https://www.dropbox.com/s/vqb91fwwhpjbc62/2018-02-25-k1%20part2.PNG?dl=0</a>

The replacing member, who started with 0% and ended with 20% for all three categories, shows correctly on the worksheet, but their K-1 part 2 also shows 20% beginning and 20% ending in all three categories.

I appreciate your help here.

Anonymous

If you see in the worksheet the 3rd column says "Int/Fnl" so the ending column is matching the worksheet. This is explained more by a platform user below. Let us know if you have questions.

Rick19744

Answer

Level 13

I believe you asking a familiar question on K-1 presentation when a member terminates their interest.

See the following from the instructions of the schedule K-1:

If your interest terminated before the end of the partnership's tax year, the partnership will have entered, in the Ending column, the percentages that existed immediately before termination.

Based on the above, I believe the presentation is correct for both.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.