Answers · Partnerships · Form 1065
How Does a Partnership K-1 Affect My Personal Taxes?
Schedule K-1 (Form 1065) reports each partner’s distributive share, liabilities and other tax information.
How it works
The rule, and what it turns on.
Items can flow to different forms and are subject to basis, at-risk and passive limits.
Example
K-1 with $60,000 ordinary income, $5,000 interest and $20,000 distribution contains three different tax concepts.
Common mistakes
What we see go wrong, and what we do instead.
- Reporting only Box 1.
- Treating distribution as K-1 income.
A better approach
- Maintain outside basis separately from K-1 capital.
Authority
Where this comes from, so you can check it.
IRC §§701-704; Schedule K-1 (Form 1065) and Partner’s Instructions.
Relevant case law
United States v. Basye, 410 U.S. 441 (1973) - partners are generally taxed on distributive shares even when cash is
not currently distributed.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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