Reporting requirement for partner tax capital delayed until 2020

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The Internal Revenue Service has issued Notice 2019-66 (the “Notice”), in which the Service explains that the requirement to report a partner’s share of partnership capital on the tax basis method will not be effective for 2019 (for partnership taxable years beginning in calendar 2019) but will be effective beginning in 2020 (for partnership taxable years that begin on or after January 1, 2020).

The Notice advises that for 2019, partnerships and other persons must report partner capital accounts consistent with the reporting requirements in the 2018 forms and instructions, including the requirement to report negative tax basis capital accounts on a partner-by-partner basis.

The Notice also clarifies the 2019 requirement for partnerships and other persons to report a partner’s share of “net unrecognized Section 704(c) gain or loss” by defining this term for purposes of the reporting requirement. The requirement added by the draft instructions for 2019 for partnerships to report to partners information about separate “Section 465 at-risk activities” will not be effective until 2020.

For more information, please see the Notice.

Partnership tax K1

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Carole Symonds

Partner, Law Firm Services Tax Leader, PwC US

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