On December 18 of last year, the IRS issued draft instructions for Form 1065 for 2025 partnership tax returns. As many of you are already ramping up for the 2025 tax season, we would recommend that you take a look at pages 50-51 of the instructions, which set forth enhanced line 19 of Schedule K/K-1 reporting of “Distributions of Cash and Marketable Securities and Distributions of Other Property.” (The “Partner’s Instructions for Schedule K-1” were issued in draft form on November 20th, and they contain an explanation of expanded line 19 on pages 25-26.)

Among the many changes, there is a taxpayer-favorable change to the reporting of a distribution of marketable securities by reducing the reported value by the partner’s share of net gain (immediately before the distribution) in those securities. This reduction correlates with the exception to the recognition of gain on the distribution of marketable securities with respect to the distributee’s share of gain in the distributed security. In addition, a partnership now will have to report any decrease in a partner’s share of partnership liabilities for the taxable year.

One might speculate that this additional information is designed, in part, to assist the IRS in determining whether there is gain as a result of a decrease in a partner’s share of partnership liabilities, given that the Partner’s Instructions contain an explanation of how this gain is computed. Yet another change captures information relating to a property distribution made to a service provider.

2026 Programs Now Open for Registration
Registration is now open for two virtual spring sessions of our newly updated Fundamentals of Flow-Through® program, along with our full 2026 schedule for both Fundamentals and Tax Planning Forum® programs. We encourage you to get a head start on registering, especially if you’re planning to attend one of our in-person program in Las Vegas or Orlando.