I made an investment in a Real Estate Loan LLC which holds mortgage notes. I received my first K-1 for 2023 and it shows interest income that is almost double the amount of distributions I received. There are deductions on line 13, but it appears that I am being taxed on the entire amount of interest the LLC earned, rather than either the distribution figure or the income less the deductions. Is this correct?
Yes, this correct.
The LLC is a pass-through entity and you are taxed on the entirety of the profit/interest allocated to you on your Schedule K-1, even if that profit/interest hasn't been distributed to you.
Distributions are reported in box 19 of your Schedule K-1 and aren't taxed if they don't exceed the basis of your LLC membership interest.
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