Why doesn’t the amount of distributions on my K-1 equal the deposits I had last year?

The amount of distributions listed in box 19 of the Form K-1 differs from the total distributions for the year. Why?

Disclaimer: I am not a CPA, financial adviser, tax planner, lawyer, doctor or anything close to any of these things. I’m just a real-estate investor with some great partners whom I’m very thankful for and trying to help out by answering their questions as best that I can.

The K-1 and tax return use cash accounting and report the amount of income the property generated from Jan.1 through Dec. 31 and not on the amount distributed to investors. Your Q1 deposit was actually as a result of income generated in Q4 of the previous year. Distributions lag the actual cash income by a month or so. So if you’re looking at your 2016 deposits they are based on the property income for the period 10/1/15 through 9/30/16.

Additionally the amount distributed does not necessarily equal the amount of income generated by the property. For example we don’t have to pay Depreciation (it’s often called a “phantom expense”) though that gets reported as an expense on the tax return and K-1s.