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IRS guidance on reporting K-1 percentages
January 21, 2009
The IRS has issued an example of how to compute K-1 percentages for profit, loss and capital. Some interesting things that come out of it:
-Only items that affect partner capital accounts should affect partner profit and loss percentages.
-Sec. 704(c) built-in gain and loss allocations should not affect profit and loss percentages reported on the K-1, as they should already be reflected in capital accounts.
-If there are no losses affecting capital accounts to report for the year, loss ratios should be reported as zero. Presumably if there were no income items for the year affecting capital accounts, profits would likewise be allocated at zero percent for everyone.
If half of K-1s get reported correctly, it would be a miracle.
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Comments
In reporting K-1 info for Oil and Gas Depletion, the software I am using calculates 15% X Income From Oil and Gas= depletion Total.
There is other info pertaining to Depletion provided by the k-1. For example:
20T1 Tot Sustained-Assumed Allowable Depletion
20T2 Cost Depletion
20T3 % Depletion in excess of Cost Depletion
20T4 % Depletion in excess of Basis
20T5 Net Equivalent BBLs of Production
Should I just accept the 15% calculation or should I report the Cost Depletion(20T2)
asMy Depletion?
Posted by: Elwin Buchanan | March 22, 2009 8:35 AM
The 15% is Percentage Depletion and it is the maximum amount allowable.
The excess of Percentage over Cost is an AMT Preference.
If Cost is greater than the Percentage then, take cost.
Posted by: Bill Bender | March 15, 2010 9:27 PM