Mike's question:
I have a borrower who derives a large percentage of her cash flow from capital gains. She shows a $404M capital gain from sale of ownership in an entity. On the k-1 the entity shows a negative capital account of (309M). It seems to me that the cash gain is probably only $95M since $309 of the gain was netting out her capital account to 0. Is this correct or should I give her all of the $404M gain as cash flow?
Linda says:
It can be difficult tell the cash impact of amounts reported on the K-1. It depends, in part, on whether the k-1 is on the tax-basis or FMV basis. And when all is said and done, if it is significant, you may need to ask for the sale agreement. Here is the scoop...
The post When Capital Gains Rules Camouflage the True Cashflow: 1065 K-1 appeared first on Linda Keith CPA.