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FAQ / For purposes of the requirement in the Form 1065 Schedule K-1, Item J, instruction at page 24, first paragraph, last sentence referring to "multiple changes in the profit and loss sharing percentageFacts: Without the requested clarification my client partnership will have to prepare an enormous attachment to each of its Schedules K-1, as such, allocations may fluctuate many times during the year as the variables on which they are based (profit targets of a certain activity, etc.) change. The partnership agreement does not provide for fixed percentages in the partnership profit, loss, and capital. One partner sold part of his interest on two different dates during the year. A6: Yes. For purposes of the requirement in the Form 1065 Schedule K-1, Item J, instruction at page 24, first paragraph, last sentence referring to "multiple changes in the profit and loss sharing percentage during the year," the phrase “change” for this purpose does not apply to changes which occur because of fluctuations in profit allocations during the year due to formula methods specified in the partnership agreement. The partnership must report on Schedules Item J the percentage interest at the beginning and end of year in profit, loss, and capital for each partner. In cases where the partner has multiple changes in ownership, the multiple change attachment to the K-1 is necessary but only listing dates and percentages for actual changes in ownership. |
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