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Overview

2.0 Credits
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Tax practitioners are responsible for presenting partner capital accounts on the tax basis. But what does this mean, and how have rules changed in recent years regarding partner capital accounts? For tax practitioners preparing partnership 1065 forms, examine these complex rules in practical and understandable terms.

Objectives

  • Understand how a partner determines and reports his or her tax basis capital account 

Major Topics

  • How a partner’s outside basis and capital account differ
  • Reconciling Schedule M-2 Form 1065 with Partnership K-1 Schedule L
  • IRS requirement to report partner tax basis on the transactional approach
  • Implications if a capital account is negative
  • Deficit restoration accounts and qualified income offsets
  • Modified outside basis method and modified previously taxed capital method
  • Determining a partner’s beginning capital account 
  • Beginning capital account for partnerships and partners consistently reporting on the tax basis
  • The two types of adjustments under 754 and how 743 and 734 require different capital account presentations

 

Prerequisite

Basic understanding of tax rules relating to partnerships and partners