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Fixed Assets and UltraTax CS 2023 help is now on Help and Support. We're still moving articles, but you can find most content for the 2023 tax year there. Continue using the Help & How-To Center for tax years 2022 and older.

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?

Answer

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.

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.

For more information, see Distributing amounts to partners using the proration method and Distributing amounts to partners using the interim closing of books method.

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

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