IRS releases draft Form 1065 instructions

October 26, 2020

The IRS has released an early draft of instructions to Form 1065, U.S. Return of Partnership Income, for tax year 2020 that include revised instructions for partnerships required to report capital accounts to partners on Schedule K-1.

The revised instructions indicate that partnerships filing Form 1065 for tax year 2020 are to calculate partner capital accounts using the transactional approach for the tax basis method.

Under the tax basis method outlined in the instructions, partnerships report partner contributions, the partner's share of partnership net income or loss, withdrawals and distributions, and other increases or decreases using tax basis principles as opposed to reporting using other methods such as GAAP.

The IRS is now accepting comments on the draft Form 1065 instructions at lbi.1065.comments@irs.gov.

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