K-1 Requirements

[Edsel]

I will begin with a narrative facing a situation with which I am not very familiar - and someone please tell me if and when I am wrong.

A 10% partner sold her share effective 1 minute after midnight on January 1.  The intent was to receive a K-1 with zeroes in ordinary income for the calendar year.

The partnership, however, had inventory on 01/01/18 left over from 2017.  Using fictitious numbers, $60,000 in inventory.  During 2017, the cost of sales was 66.67%, meaning that the $60,000 would generate $90,000 in sales and $30,000 in margin, before operating expenses, which were 15% of sales.  The inventory would thus generate $90,000 minus $60,000 minus $13,500, or $16,500 in ordinary income.

If I understand the rules for issuing the K-1, this shareholder would still receive 10% of the $16,500 in ordinary income, or $1650 on her K-1.

Does this sound correct?  Thanks in advance for responding.

[Lynn EA USTCP in Louisiana]

$1650 x % of # of days of ownership in the year =~ $4.52.  Do the special date allocation section of the k-1 input.

[Edsel]

Thank you Lynn for your response, and correction.

Edsel...

[grandmabee]

But was there any Sales in the one minute before she sold her shares?  so wouldn't beginning & ending inventory be the same and zero,