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1065 Schedule K-1 Change

The instructions for the 2018 version of Form 1065, U.S. Return of Partnership Income, contain a new requirement that has not been widely publicized.  The change appears on page 30 of the instructions and relates to the capital account analysis (item L) on Schedule K-1.

According to the instructions, if a partnership reports the capital account analysis using any basis other than the tax basis, (i.e., using GAAP, 704(b) book, or other), there is a new reporting requirement on Schedule K-1, if the tax basis capital for any partner at the beginning or end of the tax year is negative.

Even though the entity is not reporting such negative tax basis capital in the capital account analysis in Item L, the partnership must report the beginning and ending shares of tax basis capital in box 20 (other information) of Schedule K-1, using code AH.  This reporting requirement is in addition to the information otherwise being reported in item L of Schedule K-1.

This requirement did not appear in the instructions for the 2017 version of Form 1065.

Note: If the entity reports the capital account analysis in item L using the tax basis, then no additional information is required on the Schedule K-1.

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