1065 Dallas Partners Case Study Facts: Using 1065 after Bridge Import

Dallas Partners Case Study Facts: Introduction * Using Trial Balance Bridge

Verifying the Partner Information

  1. Select Quick Track > Partner Information.

    OR

    Select Partner Information > Partner by Partner Data. Click the name of the partner to be viewed.
  2. Select a sample of partners and verify that the information imported correctly.

The partners can be reviewed in a columnar format by selecting Quick Track > Columnar Partner Info or Partner Information > Partner by Partner Data > Columnar Partner Entry.

# Name Type of Partner EIN Address Profit/
Loss Ratio		 Beginning Capital
1 Jeff Scott General Passive 111-11-1111

426 Oak Street
Albany, NY 06111

20% 1,800,000
2 Reynolds Co. S Corp. General Active 222-22-2222

766 First Street
Albany, NY 06111

10% 1,000,000
3 Andrew Hale Limited Passive 333-33-3333

9 Willis Street
Albany, NY 06111

10% 1,000,000
4 Larry Moore Limited Passive 444-44-4444

2222 South Drive
Albany, NY 06111

5% 800,000
5 Kevin Price Limited Passive 555-55-5555

321 Wayside
Albany, NY 06111

10% 900,000
6 Jim Goodwin Limited Passive 666-66-6666

766 First Street
Albany, NY 06111

5% 500,000
7 John Smith Limited Passive 777-77-7777

100 Main Street
Albany, NY 06111

5%

500,000
8 Mary Jones Limited Passive 888-88-8888

311 South Street
Albany, NY 06111

5% 600,000
9 Stewart Co. S Corp. General Active 999-99-9999

5000 Clark Street
Albany, NY 06111

20% 2,000,000
10 Wayne Brown Limited Passive 101-10-1010

701 Griffith Drive
Albany, NY 06111

10% 900,000

Changing Partner Information

Andrew Hale changed from a limited partner to a general partner. Andrew Hale’s partner information needs to be updated.

  1. Scroll down to Partner Type where the system default is set to Limited. Andrew is now a general partner.
  2. Under Partner Override, click the down arrow and select General.

Common Partner Information

Along with entering partner information individually, you may select options that apply to all partners in the return.

  1. Access Partner Information > Common Partner Data to review these options.
  2. Select the Common Partner Information tab.
  3. Scroll down to the section entitled Federal Form 1065 Sch K-1 Only - Miscellaneous Partner Options.
  4. Check the box Treat individual general partners as passive for the Analysis of Net Income (Loss).
  5. Leave the box for Treat individuals limited partners as active for the Analysis of Net Income (Loss) checked.
  6. Under the Contributions/Distributions tab, enter a date for the Cash Distribution of 09/01/2019.

Transfer of Interest

On June 30, 2019, Jeff Scott (partner #1) transferred half of his 20% partnership interest to Reynolds Co. (partner #2). Record the transfer of interest through the Organizer window:

  1. Select Quick Track > Transfer of Interest.

    OR

    Select Partner Information > Transfer of Interest > Transfers > Add New Transfer Date.
  2. Enter 06/30/2019 and press Enter.
  3. Enter Partner number 1 in the Transferring Partner Number field.
  4. Enter Partner number 2 in the Receiving Partner Number field.
  5. Enter .50 in the ratio column, not .10.

Partner Footnote

  1. Select Partner Information > Partner Footnotes > Without Amounts > Add new Footnote Number.
  2. Enter a number for the footnote, up to four digits.
  3. Select Both Federal and State as the attachment option.
  4. Enter the following text in the Footnote Detail area:

    PLEASE CONSULT YOUR TAX ADVISOR WHEN FILING YOUR TAX RETURN TO ASSURE PROPER INCLUSION OF THE AMOUNTS LISTED ON YOUR SCHEDULE K-1.

Special Allocations

The partner import included Special Allocation amounts for Cash Distribution (WD), SEP Contribution (DC), and Guaranteed Payment (GP). The cash distribution was paid on 09/01/2019.

Partner WD DC GP
Jeff Scott 1,247,000

72,825

  
Reynolds Co.    

22,000
Andrew Hale 1,247,000

72,825

  
Larry Moore    

105,000
Kevin Price 936,000

55,000

  
Jim Goodwin 936,000

55,000

  
John Smith 1,269,000

54,237

  
Mary Jones 600,800

54,238

  
Stewart Co.     25,000
Wayne Brown     20,000
  1. Verify that the special allocation data imported correctly. Select Partner Information > Allocations > Special Allocations.
  2. Select each two-digit allocation code and review.
  3. Apply the special allocation for Cash Distribution. Select Partner Information > Common Partner Data > Contributions/Distributions.
  4. Verify the distribution date of 09/01/2019 and verify the total amount under the Cash Distributions column.
  5. Enter the special allocation code WD in the Alloc Code field to the right of the amount.
  6. Apply the special allocation for SEP Contribution. Select Quick Track > Page 4, Deductions.

    OR

    Select Sch K > Deduction Summary.
  7. Verify the total amount on the line Payment for partners to a SEP.
  8. Enter special allocation code DC in the Alloc Code field to the right of the amount.
  9. Apply the special allocation for Guaranteed Payment. Select Quick Track > Page 4, Income.
  10. Enter the special allocation code GP in the Alloc Code field for the line Guaranteed Payments carrying to Schedule M-1. This amount will come from other input.

Nonrecourse Liabilities

Special allocation codes need to be created for Nonrecourse Liabilities and Cash Contributions.

Nonrecourse liabilities of $1,000 are to be specially allocated. Allocate the first $100 to Jeff Scott with the remaining $900 to be allocated prorata among all of the partners.

  1. To specially allocate this item, select Partner Information > Allocations > Special Allocations > Add New Special Allocation Code.
  2. Enter a two-character alphanumeric special allocation code. This code must be two characters and NOT begin with a zero. This is a required entry.
  3. Enter a description for the code, such as Nonrecourse Liabilities.
  4. Select Residual in the Allocation method as the method to allocate the residual.
  5. Tab to the Amounts column for partner 1, and enter $100.
  6. The area used to enter information about partnership liabilities may be accessed in two ways. Select Balance Sheet and Reconciliation > Sch L > Liabilities Allocation.

    OR

    Select Common Partner Data > Liabilities Allocable.
  7. In the Nonrecourse Liabilities field, enter $1,000 in the Total Amount (Override) column.
  8. Enter the two-character alphanumeric special allocation code established above for Nonrecourse Liabilities in the Alloc. Code field.

Cash Contribution

Dallas Partners contributed $1,500 to United Way. The contribution is to be specially allocated, with $500 going to Reynolds Co. and the remainder allocated to other partners using the residual method.

  1. Select Partner Information > Allocations > Special Allocations > Add New Special Allocation Code.
  2. Enter the two-character special allocation code.
  3. Enter Charitable Contributions as the description.

    The same allocation code may be used for multiple allocations if the percentages, amounts and methods are the same for each allocation. Since we are going to use the residual allocation method for the remainder of charitable contributions, we must create a new special allocation code.

  4. To allocate the first $500 to Reynolds Co and the remainder to the other partners, use the residual method. Enter $500 in the amount column on the line for Reynolds Co.
  5. Select Sch K > Deductions Summary.
  6. Click the Charitable Contributions Detail-Cash tab.
  7. Enter $1,500 contribution to United Way under 50% Contributions.
  8. Enter the special allocation code designated above for contributions in the Alloc. Code column under Contributions for Cash: 50%.

The $1,500 contribution was not included in the information imported from the Trial Balance Bridge. A book adjustment would be necessary to reflect this item on the Trial Balance and include it when the trial balance was merged into the return.

Ordinary Income - Depreciation

Select Ordinary Income and Deductions > Depreciation and Amortization > Dallas Partners > 4562 Information > 4562 Overrides.

Enter the following information on the appropriate lines.

  Basis Recov. Conv. Method Current Yr.
Depr.
5 year 9,000,000 5.00 HY 200DB

1,800,000

7 year 3,000,000 7.00 HY 200DB 428,700

  Date in Service Basis  
Nonres. rent 09/01/2019 10,000,000

74,900

MACRS deduction for assets prior to 2019: 1,615,300

Other Schedule K Data Entry Items

  1. Select Schedule K > Income Summary > Income-Miscellaneous tab.
  2. Enter $1,500 for Miscellaneous Income.
  3. Select Schedule K > Alternative Minimum Tax Items.
  4. Enter -1,243,101 on Line 17a, Post-1096 depreciation adjustment.
  5. Select Schedule K > Foreign Taxes.
  6. Enter Germany as the foreign country.
  7. Enter on Line 16f Foreign gross income at the partnership level: General Limitation 535,000.
  8. Enter on Line 16k Deductions allocated and apportioned at the partnership level: 428,000.
  9. Verify Line 16l(1) Total Foreign Taxes Paid: 80,000.

Sale of Business Property

  1. Select Quick Track > Schedule D/Form 4797 Sales of Business Property.

    OR

    Select Gains and Losses > Sale of Business Property > Property Descriptions > Add new Description of Property.
  2. Enter Machinery & Equip. as the description and click OK.
  3. Select as Type of property: 1245 property.
  4. Enter the date acquired: 01/01/1999.
  5. Enter the date sold: 08/01/2019.
  6. Enter the Gross Sales Price: 50,000.
  7. Enter the cost or other basis: 2,000,000.
  8. Enter the accumulated depreciation: 2,000,000.

Transmittal Letters

Generate transmittal letters and filing instructions, stating where the partnership’s return will be filed. (Cincinnati, Ogden, and Philadelphia are the available options). Partner letters should also be generated.

  1. Select Quick Track > Letters.

    OR

    Select Letters and Filing Instructions > General Options.
  2. Select Separate Transmittal Letters and Filing Instructions in the Select Which Letters You Wish to Print section.
  3. Verify that the Auto Selected Center is correct.
  4. Verify that New York is indicated in the State Postal Code section.
  5. Select Partner Letter Options.
  6. Click the check box to the left of Print partner letters to print the letters.

New York Partnership

  1. To add New York to the return, select States > State and City Activation.
  2. Check the box in the State Activation column next to New York.
  3. Select Compute > Full Recompute.

Completing the 1065 Computations and Reviewing the Return

Although you have been instructed to make additional changes to the tax return after the return has been merged from the Trial Balance Bridge, those entries are for the purpose of teaching tax application navigation. In an actual client’s return, you would return to the Trial Balance Bridge, adjust any amounts that were added, changed or deleted, and remerge the data into the tax return. All adjusting entries for the tax return can be accommodated in the Trial Balance Bridge through journal entries or by adjusting incorrect general ledger amounts.

  1. Select Compute > Full Recompute.
  2. When completed, review Form 1065, Schedule K, and all activity amounts.

Enabling Allocations to Schedule K-1

  1. Once you are satisfied with the results on the federal form screens, select Options > Partner Allocation.
  2. Select Compute > Full Recompute. When complete, review K-1 data by selecting the Tax Forms tab to view each partner’s K-1.

 

 

 

Case Study Facts/dallas_using_1065.htm/TY2019

Last Modified: 03/19/2020

Last System Build: 06/17/2021

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