Schedule K-1

A Schedule K-1 is a type of tax document used to report partnership incomes, losses, and dividends. Each individual partner is obligated to complete one of these forms, whenever necessary, and must include it with their respective personal tax returns.

The tax obligation recognized on a Schedule K-1 is determined by each partner’s basis in the partnership. This basis is determined by changes in capital contributions, as well as changes in partner income.

For example, a partner in a company decides to contribute $60,000 in cash to a partnership, and the partner’s share of income for that year is $5,000. The total basis is $65,000, less any withdrawals the partner might take. This number is important, because if the basis sums to zero, any additional payments to the partner may be taxed as ordinary income.

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Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.

Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested.

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Schedule K-1

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