If you will be preparing 2020 partnership returns, we have the course for you. By now, you have probably heard partnerships filing Form 1065 for tax year 2020 are to calculate partner capital accounts using the transactional approach for the tax basis method. Partnerships report partner contributions and share of net income or loss, withdrawals and distributions, and other increases or decreases using tax basis principles as opposed to reporting using other methods.
As such, unless the specific partnership qualifies for an exception, it must now report on the transactional method beginning in 2020. Under IR-2020-240, partnerships that did not prepare Schedules K-1 under the tax capital method for 2019 or otherwise maintain tax basis capital accounts in their books and records (for example, for purposes of reporting negative capital accounts) may determine each partner’s beginning tax basis capital account balance for 2020 using one of the following methods: Modified Outside Basis Method; Modified Previously Taxed Capital Method; or Section 704(b) Method. Publicly traded partnerships have special rules.
Our new webinar, New Rules Regarding the Calculation and Tax Reporting of a Partner’s Basis and Capital Account (CPMB), will cover these new issues and many others. Topics will also include negative capital accounts, inside and outside basis, deficit restoration obligations, and reconciliations with the balance sheet. You will not want to miss this offering.
Understand that IRS has undertaken this effort to curb partnership abuses, probably with the contemplation of better compliance with adequate basis for utilization of losses and similarly the recapture of deficits in capital accounts. Be prepared. Do yourself a favor and sign up now for New Rules Regarding the Calculation and Tax Reporting of a Partner’s Basis and Capital Account (CPMB). Multiple webinar dates and Self-Study formats are available.
Nick Spoltore is VP of Strategic Content Development – Tax, Regulatory, and Emerging Markets for Surgent CPE. Mr. Spoltore is a graduate of the University of Notre Dame and of Delaware Law School. Before joining Surgent, he practiced tax and business law at the firm of Heaney & Kilcoyne. He is admitted to practice in PA, DE, and NJ.