Originally Posted by Deena
Thank you for the information about unrealized losses not carrying over to K-1s. The problem now is not knowing the precise line on the form 1065 to list the unreconciled amount. I assume it's in schedule M-2, but I don't know which line exactly. Seems like it would be line 4, but the only sub-choices there are "Depreciation" and "Travel/Entertainment", neither of which are correct for asset impairment.
Sch L contains the llc’s balance sheets at the beginning and end of the tax year. All information shown on the balance sheets for the llc should agree with its books of record. The Sch L should be prepared on the accounting basis the LLC using for its books and records. There are situations when the books are prepared on a different basis than the tax return. In the case of depreciation, an allowable method may be used for tax reporting purposes that is disallowed for book purposes. For example, sec179, bonus or MACRS depreciation may be allowed for tax reporting purpose but straight-line depreciation is required for book reporting purposes. The accumulated depreciation on the Sch L is to be reported on the “book” basis. To reconcile the book income to the tax income reported on the tax return, these differences are reported on the Sch M-1 or M-3 where required. I guess you can taker it to a tax preparer in your local area for more accurate technical help.
Note; asyou can see, Sch L, M-1, and M-2 are not required to be completed if the LLC answered “Yes” to all of the four questions 6 of Sch B. The balance sheet , Sch L, should agree with the LLC's books and records. You need to attach a statement explaining any differences. Even if the Sch L is not required for federal purposes, the information will transfer to your state return that does require the information.