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A Partnership of 8 members each invested $20k into a medical device in development. I'm preparing their 1065 Partnership return. The only activity was to transfer $160k from the partnership to the company making said medical device. This is not an expense to the partners but a balance sheet item. The partners are thinking this should show as a loss on their K-1s. I explained this isn't a loss but an investment. Before I reiterate my stance with them is there anything I am not seeing or am missing? Thanks in advance.
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You done good! Explain that the new country store stocked up on a whole lot of Budweiser. At the end of the year all the Bud was still on the shelf. They can't take the cost of the Bud until someone buys it.
Bud is sort of a medical device this year, so I hope my analogy works. 🍺
Answers are easy. Questions are hard!
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🥃
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I think restating and examining this might be helpful: "each invested $20k into a medical device in development."
They invested into their partnership, which in turn, invested in the Company that is making the device. The did not invest in the Device.
Or, they are a lender to that entity.
Or, they gave a Grant.
You need to identify what these funds were "given as" to that other company.
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Good point Thanks That's why I posted it here.
