Reconciling GAAP Basis and Tax Basis in Partnership Income Tax Returns and K-1 Schedules

704(b) Book-Ups, Potential Impact of IRS Centralized Audit Regime on ASC 740 Reporting for Partnerships

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, July 25, 2018

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax preparers and compliance professionals serving partnerships and LLCs with a robust and practical guide to reconciling GAAP and tax basis accounting in preparing partnership income tax returns and K-1 schedules. The panel will discuss complex book-to-tax adjustments specific to partnerships, outline the impact of recent tax reform on partnership accounting, and detail the particular challenges in tying book-to-tax income in partnerships that have distribution based operating agreements with targeted allocations.

Description

Reconciling GAAP to tax basis often presents significant challenges for tax advisers preparing or utilizing K-1 Schedules reporting GAAP basis. While some lenders to real estate partnerships will allow tax-basis financials, investors and creditors still look for GAAP basis financials, even without any legal requirement to do so.

GAAP basis financials are accrual-based accounting, which creates differences in allocating income and expenses by accounting period. These differences must be reconciled through additional K-1 disclosures to arrive at the partner’s capital account balance. For partnerships with distribution-based operating agreements, allocations may create other GAAP reconciliations.

The recent enactment of the centralized partnership audit procedures will increase the complexity for tax advisers in accounting for any imputed underpayments assessed as a result of an IRS examination at the partnership level. GAAP basis partnerships will need to determine whether any assessment is treated as a partnership liability or a transaction between the partnership and its impacted partners.

Listen as our experienced panel provides a practical guide to GAAP/tax basis reconciliations on partners’ K-1s.

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Outline

  1. GAAP basis financials reported on K-1
  2. Critical differences between GAAP and tax basis
  3. ASC 740 for partnerships
  4. Tying back Section 704(b) books to GAAP and tax basis schedules
  5. Impact of IRS centralized partnership audit regime change on GAAP allocations

Benefits

The panel will discuss these and other relevant topics:

  • What are the most common partnership reconciliation items between GAAP and tax basis?
  • How does the presence of a distribution-based partnership operating agreement impact the reconciliation between GAAP, tax basis and IRC 704(b)?
  • Impact of the Section 199A deduction on GAAP basis reporting on partners’ K-1 Schedule
  • What GAAP adjustments will be required in cases of an imputed underpayment assessment by the IRS?

Faculty

Bilsky, Jeffrey
Jeffrey N. Bilsky

Partner, National Tax Office
BDO USA

Mr. Bilsky has more than 20 years’ experience providing tax services to private equity investment funds, capital...  |  Read More

Thomas A. Orr, CPA
Thomas A. Orr, CPA
Senior Manager
BDO USA

Mr. Orr has over seven years of experience in public accounting with both regional and national firms. His experience...  |  Read More

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