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October 22, 2020
2020-2528

IRS's early draft instructions for Form 1065 revise instructions for partnerships required to report capital accounts to partners

The IRS has announced (IR-2020-240) the release of an early draft of the Instructions for Form 1065, U.S. Return of Partnership Income, for tax year 2020, which includes revised instructions for partnerships required to report capital accounts to partners on Schedule K-1 (Form 1065). The revisions instruct partnerships filing Form 1065 for tax year 2020 to calculate partner capital accounts using the transactional approach for the tax-basis method — i.e., report partner contributions, the partner's share of partnership net income or loss, withdrawals and distributions, and other increases/decreases using tax-basis principles, instead of using other methods like GAAP. The revised instructions follow a request for comments (Notice 2020-43 ; see Tax Alert 2020-1525) the IRS issued in June 2020.

A Tax Alert on the draft instructions is forthcoming.

 

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