Understanding Schedules K-1 (Tax #3)
Q: Is the interest income reported on Peter Keys' Schedule B ($17,301) considered cash paid to him from his loan to Information Access, Inc.? If so, is it always a cash event?
A: It appears to be a cash event. It is possible, however, that the company accrued the $17,301 interest expense payment to Keys. If so, he would not have received that amount in cash.
If it were an amount transferred from the Schedule K-1, it would not be a cash event. The $345 of interest income on Schedule B was from Information Access – Keys' pro rata share which was cash in the form of interest paid to the company but non-cash to Keys.
Q: The Schedule K-1 for the 1120S used to report the partner's capital account analysis like the Schedule K-1 for the 1065. Why does it no longer report this information?
A: The 1120S Schedule K-1 reports percent of ownership only. This is different from a partner's capital account on the 1065 Schedule K-1. If, at some point in history, the 1120S Schedule K-1 reported an owner's capital account, this information was subsequently omitted because of Congressional legislation and not because of an accounting event associated with GAAP.
Course overview: Understanding Schedules K-1