The following information refers to the Partner’s Adjusted Basis Worksheet in a partnership return. The worksheet is available from screen K1 by using the Basis Wks tab at the top of the screen.

Basis is tracked at both the 1065 level and the 1040 level, however, the worksheets are not always the same between the 1065 and 1040 returns. The "inside basis" is calculated at the partnership level, while the "outside basis" is calculated at the partner level. Therefore, the basis worksheet in the 1065 package is just an estimate of how the basis may be calculated at the individual level. All the final calculations and limitations are applied at the individual (1040) level. In addition, the Schedule K-1 that is issued to the partner is not limited and may show negative amounts where applicable. See Drake Tax - Basis, At-Risk, and Passive Activity Limits for details about limitations in the 1040 return.

Use the Basis Wks screen to calculate a partner’s new basis after increases and/or decreases are made to basis during the current year. A partner’s adjusted (outside) basis refers to the partner’s investment in a partnership. The basis is determined without considering any amount shown in the partnership books as capital, equity, or similar account. When a partner disposes of an interest in a partnership, the difference between the sale price and the adjusted basis is the taxable gain (loss).

• Increases to basis can include cash contributed, taxable income of partnership (including capital gains), tax-exempt income of partnership, and partner’s adjusted basis of property transferred to a partnership.

• Decreases to basis can include distributions of cash or property to partners, separately stated losses and deductions, nondeductible corporation expenses, and credit adjustments.

The top of the Basis Wks screen displays the ID number of the partner to which the worksheet refers. To move to the Basis Wks screen for another partner, open that partner’s K1 screen and click the Basis Wks tab there.

Annual Updates

When the program is updated to the next tax year, the end-of-year basis and partner loan amounts are automatically updated to the beginning of the year. Any loss/deduction carryover is updated to the beginning of the year and its character (ordinary loss, section 179 expense, charitable contributions, etc.) maintained. The program also tracks the amount of debt applied to losses and the total amount of loss carryforwards.

If a K1 screen is marked as final, none of the related screens for that partner are updated for the next year.

Printing the Worksheet

To activate the printing of the basis worksheets within a return, on the PRNT screen, in the section K-1 Items to Print, select Print partner’s adjusted basis worksheet.

The basis worksheets can also be produced globally by selecting Print shareholder's/partner's adjusted basis worksheet in Setup > Options > Form & Schedule Options tab.