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?
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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.
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.
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