Beginning capital account in a partnership

Forum|Forum|3 years ago
March 17, 2023
1 reply
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Does TurboTax H&B not update capital accounts in partnerships?

Two different LLCs as a member for 7+ years and the current capital account is the same as the beginning capital account in TT H&B.

It never was an issue until one of the LLCs generated income which does not exceed my outside basis so I'm trying to update the capital account so that the income is a return of capital and not taxable.

Any thoughts?

TurboTax Home & Biz Windows

Mike9241

we can't see what you have. however, it would be unusual for a partnership to have income that is not reported as such but there are exceptions like dividends that are a return of capital on a stock holding.

chuckntr5126Author

Thanks for the reply Mike9241 but I believe you missed the point.

Turbo Tax Home & Business is not tracking my capital account and adjusting it annually. One the LLCs has been in existence since 2011 and there have been no updates to my capital account based on information I input from my K-1. It's never been an issue until now that the LLC has income and I've received a distribution that does not exceed my basis so their is no gain; just a return of capital. See Section 731 - Extent of recognition of gain or loss on distribution

Is this is a software issue in that it doesn't keep track of my basis?

JosephS1

No, TurboTax Home and Business will not automatically keep track of your basis without additional input from you. As certain items such as income or loss percentage, captial ownership percentage, recourse or non-recourse loans change yearly, so does any capital contributions or withdrawals and distributions beyond what is stated on the K-1. These items must be entered manually where indicated. The following screenshots are first from TurboTax Home & Business Desktop, and then from Home & Business Online:

TurboTax Desktop:

Some of the information, such as current year net income or loss, will flow automatically. Some as you can see above will need to be entered manually if applicable.

The following are if you are using TurboTax Online (the numbers are for example purposes only):

As you can see, the screens, whether using the Desktop, or Online versions, are nearly identical. I only included both for example purposes as you did not specify which version you were using. Once the information from Schedule J, K, and L, are entered per your K-1, your basis calculation should be complete. Also, based on what you enter, the simplified calculation for Form 6198 for basis should suffice for most purposes.

@chuckntr5126

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