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Lender’s Online Training
Form 1065: Owner Cashflow
Name:
Date:
____________________
____________________
Fill these out as you go to reinforce the points made. We recommend you keep a
folder or three-ring binder of your handouts for quick reference when offline.
The handouts for this eCourse include selected pages from a Form 1065 and a Form
1040. You will be taking notes on each and flipping back and forth as you progress
through the eCourse. The note boxes have the slide number source for each item to
assist you.
Copyright 2008 Linda Keith CPA, Inc. All rights reserved.
www.LendersOnlineTraining.com  www.LindaKeithCPA.com  360-455-1569
1065 3) Owner Cashflow
Lender’s Online Training
Page 2
(Slide 5) This represents Guaranteed Payments to
_____ partners.
(Slide 6) Are these payments really guaranteed?
(Slide 7) Who will pay taxes on guaranteed payments?
(Slide 7) Ordinary business income is another name
for ‘taxable income’.
Who will pay taxes on the ordinary income of a
partnership?
Slide 7: Owners pay on both G________ P_________ and O________ I_______.
Copyright 2008 Linda Keith CPA, Inc. All rights reserved.
www.LendersOnlineTraining.com  www.LindaKeithCPA.com  360-455-1569
1065 3) Owner Cashflow
Lender’s Online Training
Page 3
Schedule K is the PARENT to the Schedules K-1.
(Slide 8) This number came
from:
(Slide 9) Frank is a 50%
owner. The amount that will
transfer to Frank’s K-1 is:
(Slide 8) This was not listed in
the income on page one of the
1065 because Frank’s share
needs to pass-through to
Schedule B of his 1040 tax
return.
The amount that will transfer
to Frank’s K-1 and on to his
1040 is:
50% of $150 = ___________
Copyright 2008 Linda Keith CPA, Inc. All rights reserved.
www.LendersOnlineTraining.com  www.LindaKeithCPA.com  360-455-1569
1065 3) Owner Cashflow
Lender’s Online Training
(Slide 16) Frank pays
taxes on Line 1 + 4.
See 1040, Sch E.
(Slide 16) Is Frank still an
owner?
I do not use this for recurring
cashflow if it is a final k-1.
Page 4
(Slide 9 & 16) How
was this calculated?
___% of ________.
Frank pays taxes on
this even though he
did not take it as cash.
(Slide 17) How was
this calculated?
___% of _______
Where will it be
reported on the
Form 1040?
Schedule _____
(Slide 16) What type of partner?
Implications?
If LLC, owner is active but with
limited liability unless personally
guaranteed debt.
(Slide 17) Frank owns 50%.
(Slide 17) Were the
distributions on Line
19 of the K-1 Page
one cash or some
other type of
property?
(Slide 17) If Frank works
at the business, Line 14
is Line __ __________
income plus Line ___
_______________
payments.
(Slide 9 & 16)
Why more than 50%
of Schedule K?
(Slide 17) Why is Frank liable for
more than these amounts?
Actual Owner Cashflow
Slide 19&20
Box L
+
Line 4
+
Payments to the
Withdrawals
owner are based on
other than
agreed
Guaranteed
Payments
____________ split.
Box L
-
Capital Contributed
Cash Paid to Owner
Copyright 2008 Linda Keith CPA, Inc. All rights reserved.
www.LendersOnlineTraining.com  www.LindaKeithCPA.com  360-455-1569
1065 3) Owner Cashflow
Lender’s Online Training
Page 5
This is your CHEAT SHEET for
the 1065 K-1.
Line 19 shows if the
distributions were cash (Code
A) or other property (Code B).
Copyright 2008 Linda Keith CPA, Inc. All rights reserved.
www.LendersOnlineTraining.com  www.LindaKeithCPA.com  360-455-1569
1065 3) Owner Cashflow
Lender’s Online Training
Page 6
Line 17 traces to
Schedule E of the
1040.
Copyright 2008 Linda Keith CPA, Inc. All rights reserved.
www.LendersOnlineTraining.com  www.LindaKeithCPA.com  360-455-1569
1065 3) Owner Cashflow
Lender’s Online Training
Page 7
(Slide 12) Circle the name of the partnership we are interested in and the
$62,980 pass-through from the K-1.
(Slide 14) Listing in Nonpassive column:
Partnership: ACTIVE, GENERAL PARTNER. What do we know about the liability
of a general partner?
Limited Liability Company (check name of company): ACTIVE LLC member,
called member-manager. LLC owners have limited liability unless they have
guaranteed the debt.
In both cases, this is a business actively run by the owner, not simply an
investment. Likely a higher % owner than if in the Passive columns. More likely to
have guaranteed debt.
Copyright 2008 Linda Keith CPA, Inc. All rights reserved.
www.LendersOnlineTraining.com  www.LindaKeithCPA.com  360-455-1569
1065 3) Owner Cashflow
Lender’s Online Training
Page 8
Slide 22: Cashflow available for distributions
This worksheet was completed in the eCourse: 1065 2) Company Cashflow
Business Cashflow Available to Pay Debt
Enter ordinary income (Ln 22)
Add back interest expense (Ln 15)
Add back depreciation (Ln 16a)
…from Page One, see comments below:
…from Line 20, see comments below:
…from Sch K, see comments below:
…from Sch M-1, see comments below:
[Add 1-7] Cashflow Before debt & distributions
9
10
11
Subtract Cash distributions (M-2, Ln 6)
Add Capital contributions (M-2, Ln 2)
[8-9+10] Cashflow Available to Pay Debt
B:
12
13
14
Annual Debt
Enter term debt annual payments
Enter LOC/ interest-only payments
Enter proposed loan payments
[Add 12 thru 14] Total debt
15
D:
19
20
Borrower
Misc.
A:
1
2
3
4
5
6
7
8
65,961
1,451
1,174
0
0
150
(135)
68,601
(51,820)
16,781
5,051
1,600
7,800
14,451
Personal Cashflow to Owner/Guarantor:
[8-15] Cashflow Available to Distribute
Enter partner's % profit/loss from K-1
21
22
[19*20] Owner's share before gntd pmnts
Add this owner's guaranteed pmnts (K-1, Ln 4)
23
[21+22] Available Personal Cashflow
Copyright 2008 Linda Keith CPA, Inc. All rights reserved.
www.LendersOnlineTraining.com  www.LindaKeithCPA.com  360-455-1569
1065 3) Owner Cashflow
Lender’s Online Training
Page 9
Slide 26: Choose between Actual and Available Personal Cashflow
How? __________________________________________
_______________________________________________
SUMMARY: How Taxable Income moves from 1065 to 1040
As you read this sequence, follow it along in your handouts. This is the order in
which the tax preparer does it.
Form 1065
1065, Page One, Line 22
1065, Page Three, Schedule K, Line 1
$65,961
$65,961
Multiply by 1040 owner’s % profit/loss (per 1065 K-1)
1065, Schedule K-1 for Frank Able, Line 1
1065, Schedule K-1 Add
Line 1 Ordinary income
Line 4 Guaranteed Payments
$32,980
$32,980
$30,000
Form 1040
Able Baker Book Store Nonpassive Income
(Sch E, Line 28A)
1040, Schedule E, Line 32 (2 entities combined)
1040, Schedule E, Line 41 (No rentals, trusts, etc)
1040, Page One, Line 17
$62,980
$62,980
$85,099
$85,099
$85,099
Copyright 2008 Linda Keith CPA, Inc. All rights reserved.
www.LendersOnlineTraining.com  www.LindaKeithCPA.com  360-455-1569