Your question: Can I use the 'Self-employment earnings (loss)' on Line 14 (A) of the 1065 K-1 as cash flow? The post Self-employment earnings from 1065 K-1 appeared first on Linda Keith CPA ..read more

Craig's question: Can you provide detailed information to explain every box on the k-1? Linda says: Yes, but you actually do not need to know about every box. Much of what is on either the 1120S K-1 or the 1065 K-1 is just not relevant to lenders. These items are needed by the tax preparer for calculations. Here is the short list for lenders. The post Must go faster! So many K-1 numbers, so little time… appeared first on Linda Keith CPA ..read more

Your question: How long can a business show a loss? Aren't there some rules about hobby losses? Linda says: You have seen it...a business that really looks like a hobby, or a tax dodge. When is a business really a business even if running losses? And can we ever safely ignore a business loss? The post Hobby or a Tax Dodge? What lenders need to know before they make the loan appeared first on Linda Keith CPA ..read more

Pam's question: Unlike the 1065 K-1 for partnerships and LLC's, I find that many 1120S K-1's do not include the shareholder's equity which reports contributions and distributions with the shareholder. Distributions are reported on another line, but contributions from the shareholder to the company are not reported. I request the Shareholder Basis Worksheet, but many borrowers are unfamiliar with this worksheet. Do you have any advice on how to obtain the contribution information for an S Corp?. Linda says: Pam, you have discovered one of several differences between 1065 K-1s and 1120S K-1s. Th ..read more

Donald Asks I recently reviewed a personal tax return where the individual reported a large capital gain from an asset sale. The individual historically reports capital gains, but not as large and not under Form 4797. Since it’s non-recurring it wasn’t included in cash flow. If however, it were recurring how should it be treated? […] The post Capital Gains are pass-thru. Count them or not? appeared first on Linda Keith CPA ..read more

Drew Asks: I have a question in regards to adding back home mortgage interest paid to personal cash flow (Schedule A – line 8a of 2019 1040). A few years ago, I attended a class that covered how to calculate personal cash flow. The teacher stated that it was acceptable to include Home mortgage interest […] The post Home mortgage interest and other Schedule A nuggets appeared first on Linda Keith CPA ..read more

Tony Asks: I used distributions from owners’ equity as part of the cash available for personal debt service of the owners of a law firm. The firm had a large settlement 2 years ago which continues to be the source for wages and distributions. This firm consistently takes on multi-year cases and uses the big […] The post Can we use Distributions from Equity rather than from Earnings? appeared first on Linda Keith CPA ..read more

Fred Asks I have a customer who reports guaranteed payments on their 1040 Schedule E. However, the partnership tax return info indicates the customer does not have any partnership interest. All of the K-1s provided are for other individuals and add up to 100%. There is not a K-1 for the customer.  The 2019 Schedule […] The post Guaranteed Payments to Non-Owners appeared first on Linda Keith CPA ..read more

Amanda asks: Should I use W-2 Wages for cash flow when ordinary income on a k-1 is negative? The post Conflict between S-Corp Ordinary Income and Owner W-2 Wages appeared first on Linda Keith CPA ..read more

David asks: Should EBITDA include non-operating income and expenses or not? I have received conflicting information regarding this. The post Should You Include Non-Operating Income in EBITDA? appeared first on Linda Keith CPA ..read more