The Four Dimensions of K-1 Aggregation: A Federal Overview

The current practice of K-1 reporting has led to significant complexity and risk associated with federal, state, and international reporting requirements. This includes many that practitioners understand, and others that creep up in the event of a sale of partnership asset. The authors walk through these complexities in this series of white papers.

Thomson Reuters and Crowe LLP entered into a strategic collaboration to help tax professionals address the burdensome manual work related to Schedule K-1 forms. 

The authors are tax accounting specialists from Crowe: 

Geralyn R. Hurd, CPA 
John V. Woodhull, JD 
Jonathan M. Cesaretti, JD 
Kristin N. Kranich, CPA 

The Four Dimensions of K-1 Aggregation: A Federal Overview 

With a record of higher rates of returns and fewer public companies in which to invest, alternative investments have gained in popularity across a broad spectrum of investors. According to Institutional Investor, the alternative investment industry was nearly a $9 trillion industry in 2017 and is expected to grow almost 60% to reach $14 trillion by 2023.

The term “alternative investments” includes a wide range of non-traditional investments, including investments in venture capital, private equity, hedge funds, and other derivatives, as well as limited partnerships (LPs), limited liability partnerships (LLPs), and limited liability companies (LLCs). Each of these investment vehicles has its own unique reporting requirements that add a measure of tax complexity for all investors. However, the focus of the following discussion will be on partnership and LLC investments and on the tax reporting that flows from the Schedule K-1 of Form 1065 issued.

It’s remarkable that while the data needed in a K-1 is fairly prescribed, the way in which this information is reported varies widely.