Online Support Chat
myICLUB.com

Where do the Form 1065, schedule D, and K-1 entries come from in Club Accounting?

Following is a list of lines that are filled in on the tax forms, and where those entries come from in the accounting system.

Please note that the name "Distribution of Earnings" (or "DOE") means the same thing as "Allocation of Income and Expenses" (or "AIE").

Form 1065

Page 1, Box F - Total Assets - This box is not required to be filled in by the tax printing software.

5 Interest Income - This value can be found on the Allocation of Income and Expenses Report under the Taxable Interest column.

6a/6b - 6a is sum of the Qualified and Nonqualified dividends from the Allocation of Income and Expenses Report. 6b is just the Qualifying Dividends. These values can be found on the Allocation of Income and Expenses Report under the Non-Qualifying Dividends and Qualifying Dividends columns.

8 Short Term Capital Gain - This value can be found on the Allocation of Income and Expenses Report under the Short Term Capital Gain column. This figure can include Return of Capital Amounts, which also need to be filled in on Schedule D, Part II, Line 12.

9 Long Term Capital Gain - This value can be found on the Allocation of Income and Expenses Report under the Long Term Capital Gain column. This figure can include Return of Capital Amounts, which also need to be filled in on Schedule D, Part II, Line 12.

9c Unrecaptured Section 1250 Gain - This comes from 1099-DIV, if your club has invested in a REIT.

11 Other Income - This value can be found on the Allocation of Income and Expenses Report under the Other Income column.

13a - Contributions - This value can be found on the Allocation of Income and Expenses Report, under the Charity Donation column.

13 Deductions related to portfolio income - This value can be found on the Allocation of Income and Expenses Report under the Misc Income/Expense column. While the column in the AIE reports the total income plus expenses, which could end in a negative number, the tax form displays the expense alone as a positive number.

16d - Passive ... General Limitation - Only the dividends that are from foreign companies are included which can be found in the Transaction Summary report.

16 Foreign Taxes Paid - This value can be found on the Allocation of Income and Expenses Report under the Foreign Taxes Paid column.

18a Tax-exempt interest income - This value can be found on the Allocation of Income and Expenses Report under the Federal Tax Free Interest column.

18c Non-investment expenses - This value can be found on the Allocation of Income and Expenses Report under the Non-investment expense column.

19a Distributions of cash and marketable securities - Cash distributions, found in the Withdrawal report(s).

19b (19c on member K-1 forms) Distributions of other property - Stock distributions, found in the Withdrawal report(s).
Per our accounting advisor, we use these lines for stocks instead of 19a. In a normal business partnership securities would be treated as cash and listed on line 19a.
Clubs are investment partnerships and do not follow the same rules. For investment partnerships, securities are treated as property and that is why distributions of securities are listed on line 19b or 19c as appropriate. The figure for 19c may not be immediately obvious, because it uses the club's basis in the transferred shares. This is per the IRS' K-1 instructions stating that 19C should show the partnership's basis of property before it was transferred to the member.
If securities were treated as cash, then you could not transfer stock in a full withdrawal and delay the capital gain until the stock was sold by the withdrawing member. It is because they are treated as property for an investment partnership that the gain from a club investment can be delayed further even after a member withdraws.

20a - This value can be found on the Allocation of Income and Expenses Report under many columns. It is the sum of the taxable interest, qualified dividends, nonqualified dividends, and income components of misc. expense/income, as they appear on the Allocation of Income and Expenses Report.

20b - Deductions related to portfolio income - This value can be found on the Allocation of Income and Expenses Report under the Misc Income/Expense column. While the column in the AIE reports the total income plus expenses, which could end in a negative number, the tax form displays the expense alone as a positive number.

In addition to these figures, the form also needs to be signed in two places:
1. Near the bottom of the First page, "Signature of general partner or limited liability company member manager." This should be signed and dated by the Treasurer.
2. Near the bottom of the Second page, "Enter below the general partner designated as the tax matters partner (TMP) for the year of this return." This should be signed by the club member preparing the tax returns. Most times this will be the Treasurer, but some clubs will assign a separate member, or an outside source to prepare the taxes. The identifying number requested will be the social security number of the person preparing the taxes.

Schedule D

1 - Short term totals from Form 8949 with Box A checked - This is the total of all short term capital gains which the broker listed as Covered, or Reported to the IRS.

2 - Short term totals from Form 8949 with Box B checked - This is the total of all short term capital gains which the broker listed as Non-Covered, or Not Reported to the IRS. This will most often be for stocks that the club purchased or acquired before 01/01/2011.

3 - Short term totals from Form 8949 with Box C checked - This is the total of all short term capital gains for which the club DID NOT receive a 1099 from the broker. This is VERY rare for investment clubs.

4, 5, 6 - These lines are not commonly used by investment clubs.

7 - Net Short term capital gain or loss - The total of lines 1 through 6

8 - Long term totals from Form 8949 with Box A checked - This is the total of all long term capital gains which the broker listed as Covered, or Reported to the IRS.

9 - Long term totals from Form 8949 with Box B checked - This is the total of all long term capital gains which the broker listed as Non-Covered, or Not Reported to the IRS. This will most often be for stocks that the club purchased or acquired before 01/01/2011.

10 - Long term totals from Form 8949 with Box C checked - This is the total of all long term capital gains for which the club DID NOT receive a 1099 from the broker. This is VERY rare for investment clubs.

11, 12, 13 - These lines are not commonly used by investment clubs.

14 - Capital gain distributions - If any transactions were entered specifically as either short term or long term Capital Gain, their totals would show up here. This would most commonly be if a dividend was reclassified, or is a company performed a cash+stock merger and the club received more cash than their basis in the original company

15 - Net Long term capital gain or loss - The total of lines 8 through 14

Schedule K-1

Part 1
A, B, C, D - Basic club information such as name, address and filing location.

Part II
E, F, G, H and I - Basic member information such as name, address, social security number.

J - The share of the club profit and loss given to the member at the start of the previous year, and the end of the year.

K and L - These sections are not required for Club Accounting partnerships.

We recognize that some accountants may ask for this information regardless of its necessity. If so, the information needed for part L of the K-1 can be found on the Individual Valuation Units ledger.
Use a start date of 12/31/2015 and a report date of 12/31/2016.
The sum of all deposits is the capital contributed.
Capital account at beginning of the year is the Paid-in-Plus-Earnings after the Distribution of Earnings on 12/31 of the previous tax year.
The capital account at the end of the year is the Paid-in-Plus-Earnings after the Distribution of Earnings on 12/31 of the year the forms are being prepared for.
The increase/decrease this year is the Paid-in-This-date amount for the Distributed earnings on 12/31 of the year the forms are being prepared for.
If a withdrawal was made it will appear with the amount on this report also. A distribution is a bit different and generally does not apply to investment clubs. The ending capital account is the Paid-in-Plus-Earnings after the Distribution of Earnings on 12/31 of the year the forms are being prepared for.



Part III
Lines 5, 6, 8, 9, and 19 - see above. 11a Other Income - This value can be found on the Allocation of Income and Expenses Report under the Other Income column.

13 Other Deductions - This value can be found on the Allocation of Income and Expenses Report under the Misc Income/Expense column and the Charity Donation column. Only the expenses are recorded here. Most expenses will be coded 'W'. Exceptions are:
Charitable cash contributions are coded "A"
Charitable stock contributions are coded "E".

16d - Passive ... General Limitation - Only the dividends that are from foreign companies are included. This amount is prorated, and while it is calculated, it cannot be directly found in the Club Accounting reports.

16l Foreign taxes paid - This value can be found on the Allocation of Income and Expenses Report under the Foreign Taxes Paid column.

19 Distributions - Any withdrawals taken by the member during the year.
Code A: cash amount taken as part of the withdrawal
Code C: Distributions of other property - Stock distributions, found in the Withdrawal report(s).
The figure here will be the club's basis in the transferred shares. This is per the IRS' K-1 instructions stating that 19C should show the partnership's basis of property before it was transferred to the member.

Per our accounting advisor, we use these lines for stocks instead of 19a. In a normal business partnership securities would be treated as cash and listed on line 19a.
Clubs are investment partnerships and do not follow the same rules. For investment partnerships, securities are treated as property and that is why distributions of securities are listed on line 19b or 19c as appropriate. The figure for 19c may not be immediately obvious, because it uses the club's basis in the transferred shares. This is per the IRS' K-1 instructions stating that 19C should show the partnership's basis of property before it was transferred to the member.
If securities were treated as cash, then you could not transfer stock in a full withdrawal and delay the capital gain until the stock was sold by the withdrawing member. It is because they are treated as property for an investment partnership that the gain from a club investment can be delayed further even after a member withdraws.

20 Other information - This value can be found on the Allocation of Income and Expenses Report under the Misc Income/Expense column.
Code Z here, is for 199a dividends, from a REIT
Code B here, is for investment related expenses. If the club only had investment related expenses, this will be the same as line 13