Form 1065 Schedule K-1 - Income and Deductions

[TX_Lenn]

I made an investment in a Real Estate Loan LLC which holds mortgage notes. I received my first K-1 for 2023 and it shows interest income that is almost double the amount of distributions I received. There are deductions on line 13, but it appears that I am being taxed on the entire amount of interest the LLC earned, rather than either the distribution figure or the income less the deductions. Is this correct?

[MinhT1 · Accepted solution]

Yes, this correct.

The LLC is a pass-through entity and you are taxed on the entirety of the profit/interest allocated to you on your Schedule K-1, even if that profit/interest hasn't been distributed to you.

Distributions are reported in box 19 of your Schedule K-1 and aren't taxed if they don't exceed the basis of your LLC membership interest.