I have a client who received his K-1 for 2005. It was in a fiscal year of 100105-093006. I know it should have been put on 2005 with a 1040x. My question is this, didn't the IRS say a few years ago that you could claim this in the year you received it (this case 2006) if you continued the same year after year? Thanks for you help.
A K-1 ending 093006 goes on the individual's 2006 tax return. How could it go on his 2005, when the reporter's tax year doesn't end until 093006? Amend 2006, not 2005.
Here's your *sight* to some regs about partner and partnership taxable years, so you can humor the IRS. Note the phrase "ending within or with...." Good luck.
TITLE 26--INTERNAL REVENUE
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
Determination of Tax Liability
Sec. 1.706-1 Taxable years of partner and partnership.
(a) Year in which partnership income is includible. (1) In computing taxable income for a taxable year, a partner is required to include the partner's distributive share of partnership items set forth in section 702 and the regulations thereunder for any partnership taxable year ending within or with the partner's taxable year.
IIRC - and that's a tall order - the K-1 instructions have a very careful paragraph about which year's return the income and losses that "flow through" on a fiscal year K-1 *have to* go on. Point the IRS at their own instructions.
Are you sure you're reading all the date information on these forms correctly?
And are you sure the IRS is also reading the dates on this K-1 correctly and has picked up on the fact that the K-1 is a fiscal year K-1? Often, now that everybody uses their own format for K-1s, etc., the dates of the year aren't found in the same place - or aren't found quickly enough - and the IRS keypunch/data entry bots don't pick up on the dates... It happened to a friend of mine and she ended up paying tax on the same estate income twice. She paid *twice* on $34 of income!
Added later: the "2005" K-1 will be on 2005 forms, but if it's a fiscal year from October '05 to September '06, it will go to the partner's 2006 (it flows through at the *end* of the partnership's fiscal year) tax return...
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