# 1065-US: Proration method versus interim closing of books method - Example (FAQ)

Leave feedback

Internal Employees

Contact information (optional):

Leave this blank:

Characters left:

MFA required for electronic filing

Effective May 3rd, the 2017 version of UltraTax CS requires multi-factor authentication (MFA) to transmit e-files from CS Connect. Find out more.

#### Question

Can you provide an example of how an amount is distributed to a partner when I use the proration method versus the interim closing of books method?

The following table summarizes the partners and their ownership percentages throughout the tax year. As of the end of the day on August 31, John Smith left the partnership and transferred his share of ownership equally to the remaining two partners.

Partner name 1/1 - 8/31 9/1 - 12/31
Michael Jones 33.333333 50.000000
David Williams 33.333333 50.000000
John Smith 33.333334 0.000000

In Screen K in the Schedule K folder, \$5,000 of interest income has been entered (assume \$1,000 was earned from 1/1 - 8/31 and \$4,000 was earned from 9/1 - 12/31).

• Proration method - UltraTax CS calculates Michael's prorated percentage as 38.888888 percent. Michael's Schedule K-1 will show \$1,944 of interest (\$5,000 of interest multiplied by 38.904109% = \$1,945).

• Interim closing of books method - UltraTax CS calculates Michael's distributive share of interest as (\$1,000 multiplied by 33.333333%) + (\$4,000 multiplied by 50.000000%) = \$2,333. Michael's Schedule K-1 will show \$2,333 of interest.

The amounts calculated for the other two partners are as follows.

Partner name Proration Interim closing of books
David Williams \$1,945 \$2,333
John Smith \$1,110 \$334

Related topic: Allocating partnership items to partners FAQs (1065)