Investor Contribution, will it be considered income on a K-1?

Forum|Forum|3 years ago
December 23, 2022
4 replies
20 views

I just started a new company a few months ago, we have 1 investor that invested money into our company.

We won't spend the money until January and February 2023. Which means when the 2022 year ends we will have that cash in our account at the bank.

Will the money he invested be reported on our K-1's as income that we will need to pay taxes on?

The money is not money that we can touch for ourselves and is marked for certain expenses which will be made January and February. None of it is marked for us as the owners.

QuickBooks Desktop for Mac

Rainflurry

Level 11

@joda2023

Contributions are not considered income and are, therefore, not taxable. Contributions are listed on a partnership (Form 1065) Schedule K-1, but they are not listed on an S-corp (Form 1120-S) Schedule K-1.

joda2023Author

What’s confusing is when we do our taxes the cash in the bank account is an asset, no? Wouldn’t that be taxed then?

Also if it’s on a partnership return k1, it’s not taxed?

Thanks so much for you help with this. It’s really appreciated.

Rainflurry

Level 11

@joda2023

It is not taxed. Income is taxed, not assets. The money coming from an investor is not income that the business generated. If you went to the bank and got a loan, that money is now in your bank account but it is not taxable income. The same thing in this case, except instead of having a loan payable to the bank, that cash is recorded as partner equity, and, at some point, the partnership owes that money to the partner, similar to a bank loan.

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