Transfer of public partnership to revocable trust - two K-1's but no sale

[Rhone07]

During the year I transferred a PTP to a revocable trust. Both have the same tax ID. There was also a small sale of units during the first quarter of 2025. I was issued two K-1s, one reflecting the distribution of capital and reduction of nonrecourse debt to $0.00.  In addition, it reflects the share of current year income, deductions, credit and other income for the period prior to the transfer to the revocable trust. 

The second K-1 reflects the share of current year income, deductions, credit and other income for the period after the transfer to the trust, a capital contribution that equates to the basis reported by the broker on the date of the transfer and nonrecourse debt substantially less than the other K-1.

Question, since this was not a sale can I report it as one K-1 combining the current year income, deductions, credit and other income from the two K-1s and using the reported capital distribution from the initial K-1 and using that as the beginning balance on the modified/combined K-1?

[Mike9241 · Accepted solution]

I would. However, your real issue is tracking your proper tax basis in the PTP. 

Beginning capital of the trust K-1 should be the same as the ending capital of the original K-1. 

TurboTax does not track basis. That's your responsibility, though, usually in a PTP it tracks your basis. Brokers don't know your tax basis because they don't receive the K-1s. Therefore, they do not adjust your tax basis for income. loss, deductions, credits, and distributions. However, when you changed the ownership the broker may have reported a new basis to the PTP based on the FMV on the date transferred. The PTP info should provide information on how to correct any incorrect info on the K-1.