New Form 1065 Requirement: Computing Tax Basis Capital Accounts

Author: Greg White

CPE Credit:  1 hour for CPAs
1 hour Federal Tax Law Updates for EAs and OTRPs
1 hour Federal Tax Updates for CTEC

Beginning in 2020 Form 1065, we’ve got a new reporting requirement. Capital accounts as shown on Form K-1 will have to be reported on a tax basis (as opposed to GAAP or §704(b)). We’ll cover the issues you need to know:
• How do you compute tax basis capital accounts for this purpose?
• What do you do if you lack sufficient information to compute the current capital account balances?
• Which partnerships will not be subject to this requirement?

Publication Date: September 2020

Designed For
Practitioners advising partnership clients.

Topics Covered

  • Issue: K‐1 Capital Accounts Reporting Issue
  • Why Does IRS Want Tax Basis Capital Accounts?
  • Risk of Not Reporting: Tax Basis Capital Accounts
  • General Rule: Adjusted Basis Partnership Interest
  • Computing Basis Partnership Interest
  • IRS Proposal: Tax Basis Capital Accounts with a "Twist"
  • Notice 2020‐43 ‐‐ Two Methods: Compute Tax Basis Capital
  • "Modified Outside Basis Method"
  • "Modified Previously Tax Capital Method"
  • Method 2: Project Out Partnerships Basis
  • Choosing a Method
  • Form 1065
  • Should You Include Disclaimer? On K‐1?
  • Escape Hatch
  • Comments on Notice 2020‐43
  • Will You Use Tax Basis Capital Account? When Filing Partner's Return?
  • Keep an Eye Peeled

Learning Objectives

  • Identify partnerships subject to the new rules
  • Identify how to compute partnership capital accounts
  • Recognize how to navigate complex issues (Sec. 743 step ups, etc.)
  • Recognize how to determine the adjusted basis in partnership interests


Instructional Method

NASBA Field of Study
Taxes (1 hour)

Program Prerequisites
Basic understanding of Form 1065.

Advance Preparation

Registration Options
Regular Fee $49.00

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