Assuming Schedule L is entered on a GAAP basis, adjusting Line 21 of Schedule L to reflect a GAAP basis capital account figure will also force the Beginning and Ending capital account numbers on the M-2 to be reported on a GAAP basis in the program. The Form 1065 instructions for the Schedule M-2 clearly indicate that the beginning and ending M-2 balances are supposed to agree with the capital accounts reported on the Schedules K-1 (tax basis). They don't. Do we need a "check box" to pull the numbers from the Schedule K-1 Worksheet totals and the net income (tax basis) from above on the M-1? At the same time, Item L on the Partner K-1s are pulling GAAP net income ???
As an even better suggestion for those of us who will continue to use GAAP for Schedule L going forward, an enhanced M-2 Worksheet that rolls forward the partners' capital accounts in two columns (one GAAP basis and one tax basis) might be helpful.
The M-1 and M-3 were sufficient. Very few accounting packages allow for tax basis bookkeeping. If they do, they also have cost basis, fair value basis, foreign currency conversion, etc. and cost a lot.
