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Old 05-08-2017, 06:03 PM
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Join Date: May 2017
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Sch K-1 /partner capital accounts

Dear Sir ,
I like to know Sch K-1 /partner capital accounts , if this transaction should be under under tax basis or section 704(b) book.

Partner A and B each contribute $100 to form AB LLC , member managed .
AB LLC filed form 1065 .Operating agreement stated profit loss shared based on capital ratio but there is also a clause on tax allocation allowed under the Internal revenue Regulations.There is no other capital contribution or asset contribution.

In year one , there is is profit of $200. Because in year 1 ; Partner A contributed more effort and time ,it was agreed that Partner A allocated $150 while Partner B allocate $50 .

Question #1 : In tax return form 1065 , Sch K-1 /Item L /partner capital accounts : Which box to choose ? : Tax Basis/ GAAP/ Section 704(b) /Other .
I prefer to choose Tax basis but not sure if i am correct .

Question #2 : If Tax basis method is selected in year 1 , must Tax basis be used for each and every year ?

Thanks and Regards
JLYS



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