Do i have to pay taxes on partnership income (UCO shares) that i did not realize yet?

Forum|Forum|5 years ago
April 2, 2021
1 reply
0 views

I have bought some UCO shares in 2020, but never sold them. I was sent a Schedule K-1 (1065) after i had already filed my taxes, and the 1065 shows 0 (empty) in Box 1 Ordinary business income. But Boxes 8 (net short-term capital gain/loss) and 11(Other income) show positive numbers. Those correspond to the gains on paper that I have not realized yet, as I havent sold the UCO shares yet.

I have not sold any of my UCO shares - should i still pay taxes this year on them?

Best answer by Rick19744

If you received a K-1, that means you invested in an entity that is taxed as a partnership.

A partnership is a pass-through entity and pays no tax at the entity level.

All income, loss, gain is passed through to the partner and any tax is paid at the partner level.

You need to begin to maintain a tax basis schedule of your investment in this partnership as this will be critical in being able to determine if losses are deductible, if distributions are taxable and ultimately your overall gain or loss upon your disposition of this entity.

Bottom line, "yes", you need to include these capital gain amounts in your 2020 tax return and pay any tax as a result of this income. Generally partnerships make a distribution for partners to provide cash for any tax impact. However, that is not always the case.