Frequently Asked Questions

ALL TAX RETURNS ARE IN THE PROCESS OF FILING FOR AN EXTENSION, WE ANTICIPATE HAVING YOUR SCHEDULE K-1 READY FOR RELEASE BY JULY 31, 2024

What is a Schedule K-1?

A Schedule K-1 is a tax document that helps investors calculate their tax obligation for the year. The SPV (fund) that you are invested in as a partner, is a “pass-through” entity.  That means all profits and losses will be passed through to you as a partners (limited and general) based on your ownership in the SPV.

It is important for each investor to understand how to interpret and use a Schedule K-1.  Most likely they’ll receive one every year. Attached is a blank Schedule K-1 that includes the following information:

  • Information about the partnership, including name, address and EIN

  • Information about the partner receiving the Schedule K-1, including their name, address and social security number.  If invested through an entity, the Schedule K-1 will show that information.  

  • The partner’s percentage of profits, losses and capital at the beginning and end of the tax year.

  • The partner’s share of liabilities

  • The partner’s share of income, deductions, credits and other items; and miscellaneous information that a partner needs in order to report their income and loss correctly.

  • The most common types of income an investor will see on their Schedule K-1 are:

  • Line 5 Interest Income:  An investor will earn interest if the fund has earned interest, typically seen when the fund asset is a convertible note.

  • Line 6 Dividends:  The Schedule K-1 will report a dividend if the SPV (fund) received a distribution from the underlying portfolio company (LLC Membership Interest in another company).

  • Line 8 & 9: Short term/long term capital gains:  If the SPV exited an investment during the previous tax year, the Schedule K-1 will report income/losses generated from the exit and either short or long-term capital gains based on the length of time that asset was held.

  • Line 13: Other deductions:  This may include management fees, legal and accounting fees, bank fees and other miscellaneous costs related to the SPV.

  • Line 19 Distributions:  When the SPV makes a distribution due to ROC (return of capital), shares of stock or cash those amounts will be shown here.

All of the above amounts will also be reflected on the Partner’s Capital Account Analysis (Item L) if looking at the Schedule K-1.

Why is there income on my Schedule K-1 when I haven’t received a distribution?

This happens when a fund reports income during the year (for example, a portfolio company has an exit), but has not yet distributed profits to its investors.  A fund might wait for all of its positions to close (which can take many years) before issuing a distribution.  Nevertheless, the partner must report their share of the fund’s income as the fund earns it.

When will I receive my Schedule K-1?

K-1s are issued after the partnership tax return has been prepared.  The partnership tax return (Form 1065) is due on March 15th each year.  However, most often these tax returns are extended (until September 15th) due to a number of reasons:  missing or incomplete information, waiting on information from a portfolio company and other unforeseen circumstances. 

Making sure that each partner provides the most up-to-date information is crucial in providing an accurate K-1.

How will I receive my Schedule K-1?

Each partner will receive a Box invite via email, that will include a folder where your Schedule K-1 will be located.

I’ve heard that there is are new Schedules called Schedule K-2 and Schedule K-3; will I be receiving these schedules?

Schedule K-2 reports items of international tax relevance and is an extension of Form 1065. This is not a form that would be issued to a partner since it is part of the partnership tax return (Form 1065). Additionally, it has replaced the foreign income and tax section of Schedule K, Form 1065.  Thus, unless a SPV has foreign partners and/or foreign sourced income and tax, Schedule K-2 is not required.

Schedule K-3 would report the partners share of the foreign sourced income and foreign tax based on their ownership % of the partnership. This form would be issued to each partner, typically at the same time as the issuance of Schedule K-1.

What if I have tax questions that were not answered here?

At this time, we are not providing “tax advice.”  We suggest that you speak with your tax accountant regarding any additional questions that you may have.

Additional Questions?

Please email tax@spvsolutions.com