Use turbotax business for GP. partner A sold all 16.5% share to partner B. Why partner A's final k-1 form 1065 on question J ending capital shows 16.5% instead of 0%?

[fred2]

I'm using turbotax business for a general partnership. partner A sold all his 16.5% share on 1/2/18 to partner B. Why partner A's final k-1 (form 1065) on question J ENDING capital still shows 16.5% instead of 0%? Why partner B k-1 Beginning capital shows 34% not 17.5%(partner B originally has 17.5% before he purchased the additional 16.5% from partner A)?

[Rick19744 · Accepted solution]

This is generally a question everyone has when an event such as this occurs.

However, TT is handling this correctly based on the K-1 instructions.  I know it seems like an odd result, but it is what is requested by the IRS.

Generally, the amounts reported in item J are based on the partnership agreement. 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. 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.

Then regarding Partner B, it appears that the 34% figure is correct as well.  In this case, the first part of the above would be what occurs, commenced (or also increases), would reflect the ownership immediately after admission.

[fred2]

Thank you very much for your confirmation.  I read IRS instruction and know TT follows IRS instruction but not sure what is the logic reason.