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CCH Axcess Tax

Transfer of Capital

General

Use the first two sections on this interview form to adjust the ending capital accounts of existing or new partners due to transfer of a partner's interest in the partnership or due to withdrawal of a partner from the partnership.

When you use this interview form, the System prints a supporting statement detailing each affected partner's capital account for the transaction. This statement shows the capital accounts before the transaction, each partner's individual transactions, and the resulting ending capital accounts.

Determination of Capital To Be Transferred

There are three options to indicate the amount of capital to be transferred to receiving partner(s):

1. If you enter a percentage of capital to be transferred and either enter code 1 in Box 40 or leave Box 40 blank, the System calculates the end-of-year capital account for the transferring partner. A percentage of that capital is then transferred to the receiving partner's(s') ending capital account(s).

2. If you enter a percentage of capital to be transferred and also enter a code 2 in Box 40, the System uses your percentage of the transferring partner's beginning capital account to calculate the amount to be transferred.

3. You can enter a specific amount of capital to be transferred (in which case your entry in Box 40 is ignored).

Transferred Capital Reporting Options

There are six options available for reporting the amounts of transferred capital. Enter the applicable code in Box 39:

Option 1 (Default): The transferred amounts carry to the contribution / withdrawal lines on Schedule K-1, Item L.

Option 2: The transferred amounts carry as positive and negative amounts of contributions on Schedule K-1, Item L.

Option 3: The transferred amounts carry to Schedule M-2 as increases and decreases.

Option 4: The transferred amounts adjust long-term capital gain or loss on Schedule K-1, line 9a.

Option 5: The transferred amounts adjust ordinary income or loss on Schedule K-1, line 1.

Option 6: The transferred amounts adjust rental real estate income or loss on Schedule K-1, line 2.

Interview Form K-7 Versus Interview Form K-6

Use Interview Form K-6, "Changes in Partners' Interest and Transferring Information", as well as this interview form if the transaction occurred at some time other than the tax year end. The System calculates effective ratios for the allocation of Schedule K items and transfers of capital amounts at interim dates from entries on Interview Form K-6. However, the System always treats capital transfers entered on Interview Form K-7 as if they occurred at the beginning or end of the year based on your Box 40 entries. Finally, Interview Form K-7 entries do not affect allocations.

Capital Ratio and Form 8308 Print and Allocation Options

Use the boxes in the "Print and Allocation Options" section to select various print and allocation options for the partners' capital ratios. Elections made in this section apply to the entire return, not just to the transfers entered on that sheet.

You can also choose to have Form 8308 prepared from entries in the "Transfers of Partnership Capital" section by entering an "X" in Box 35. Using this feature, you do not need to use the "Form 8308 Transfer Information" section. However, this feature does not work if you are using Box 31 to zero out one or more partners. If you use Box 31, you must use the Form 8308 section to produce the form.

Form 8308 Transfer Information

As mentioned above, the System can prepare a Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, when you enter transfer detail in the "Transfers of Partnership Capital" section and also enter an "X" in Box 35.

However, the System can also prepare a Form 8308 from entries in the "Form 8308 Transfer Information" section at the bottom of the form. If you use this section, you must use a separate Interview Form K-7 for each receiving partner; use another Interview Form K-7 for each additional receiving partner. Each time you use this section, the System prepares one Form 8308. The Forms 8308 are attached to the Form 1065 return with a Schedule K-1 copy prepared for each applicable partner. When you use this section, Form 8308 is produced even if you leave the rest of Interview Form K-7 blank.