K-1 box 19: partnership distributions, basis and gain
K-1 box 19 is the Schedule K-1 (Form 1065) box a partnership uses to report distributions to a partner, coded A to G for cash, section 737 property, other property, deemed distributions and distributions for services. Distributions reduce outside basis, and money above basis is gain under IRC section 731.
“To the extent the cash and the FMV of the securities (reduced by the reduction amount) received exceed the adjusted basis of your partnership interest immediately before the distribution, the excess is treated as gain from the sale or exchange of your partnership interest.” IRS, Partner’s Instructions for Schedule K-1 (Form 1065) (2025)
What does K-1 box 19 report?
K-1 box 19 reports distributions the partnership made to the partner during the year, split by code according to what was distributed and why. The Partner's Instructions for Schedule K-1 (Form 1065) (2025) list this as a change for 2025: the instructions were updated to explain the separately coded categories, which now run from code A to code G, with code E reserved.
Codes A and F report money, including marketable securities at fair market value less the section 731(c)(3)(B) reduction amount. Code F is for distributions made to a partner for performing services, and code G is property other than money distributed for services. Codes B and C report property other than money at the partnership's adjusted basis immediately before the distribution, after any section 732(d), 734(b) or 743(b) adjustments. Code D reports deemed distributions of money under section 752(b) from a net decrease in the partner's share of liabilities. Guaranteed payments stay in box 4a. A statement gives the value and basis of distributed securities and property.
How does each box 19 code change partner basis?
Each box 19 code reduces the partner's outside basis, and the 2025 partner's instructions place each one on a specific line of the Worksheet for Adjusting the Basis of a Partner's Interest in the Partnership. Only distributions of money, including deemed distributions, can create gain under section 731.
| Code | What it reports | Basis worksheet | Gain rule |
|---|---|---|---|
| A | Cash and marketable securities, other than for services | Basis worksheet, line 8a | Gain to the extent money exceeds basis |
| B | Distribution subject to section 737 (partnership's adjusted basis) | Basis worksheet, line 8b | Section 737 gain worksheet; gain increases basis |
| C | Other property (partnership's adjusted basis) | Basis worksheet, line 8c | No gain under section 731; Form 7217 |
| D | Deemed distributions of money from decreases in liabilities | Picked up on line 9a from item K1 | Gain to the extent it exceeds basis |
| E | Reserved for future use | None | None |
| F | Cash or marketable securities for performing services | Basis worksheet, line 8a | Gain to the extent money exceeds basis |
| G | Other property for performing services | Basis worksheet, line 8c | No gain under section 731; Form 7217 |
Codes A, D and F reduce basis (but not below zero) by the cash, the deemed distribution and the partnership's adjusted basis in distributed securities. Codes B, C and G reduce basis by the partner's basis in the distributed property. Outside a liquidation, the partner's basis in distributed property is the smaller of the partnership's adjusted basis or the partner's outside basis reduced by cash distributed in the same transaction. The instructions say to complete a separate Form 7217 for each date the partner receives a distribution of property subject to section 732, and not to file one when the distribution was only money or marketable securities treated as money.
When does a box 19 distribution create gain under IRC section 731?
A box 19 distribution creates gain only when money distributed exceeds the partner's adjusted basis in the partnership interest immediately before the distribution. IRC section 731(a)(1) limits gain recognition to that excess, and section 731(c) treats marketable securities as money at fair market value. Under section 752(b), a liability decrease (code D) is a distribution of money too.
Timing matters. Treas. Reg. 1.731-1(a)(1)(ii) treats advances or drawings against a partner's distributive share of income as current distributions made on the last day of the partnership's tax year, so the year's income increases basis before the draws reduce it. Gain is treated as from the sale or exchange of the partnership interest, generally capital gain on Form 8949 and Schedule D, except that any portion attributable to unrealized receivables or inventory is ordinary income, per the 2025 instructions. A loss isn't recognized on a current distribution. Under section 731(a)(2), loss is allowed only in a liquidation where the partner receives nothing but money, unrealized receivables and inventory.
What does a box 19 basis and gain calculation look like?
For example, Ana starts 2025 with $40,000 of outside basis, including a $25,000 share of partnership liabilities. During the year she draws $60,000 in cash against her share of income. Her K-1 shows $12,000 in box 1, $60,000 in box 19, code A and $5,000 in box 19, code D, and item K1 shows her liability share falling from $25,000 to $20,000. The partnership holds no unrealized receivables or inventory.
| Step | Basis worksheet line | Amount |
|---|---|---|
| Beginning basis (includes $25,000 liability share) | 1 | $40,000 |
| Add box 1 ordinary income | 4a | $12,000 |
| Basis before decreases | 7 | $52,000 |
| Box 19, code A cash draws | 8a | ($60,000) |
| Liability decrease from item K1 (same as box 19, code D) | 9a | ($5,000) |
| Total distributions and liability decrease | 10 | ($65,000) |
| Basis after distributions | 11a | $0 |
| Gain on distributions in excess of basis | 11b | $13,000 |
Because the draws are treated as made on the last day of the partnership's year, the $12,000 of income is added first. The $65,000 of money distributed exceeds the $52,000 of basis by $13,000, which Ana reports as gain from the sale of a partnership interest on Form 8949 and Schedule D. Her ending basis is $0. Form 8949 covers the reporting.
What do reviewers check on K-1 box 19?
A reviewer checking K-1 box 19 confirms six items, each tied to the 2025 partner's instructions, the Code or the regulations. The partner basis worksheet comes first, because every box 19 code is measured against basis before the distribution. Item K1 at the beginning and end of the year comes second, because a liability decrease is a deemed distribution. The box 19 statement comes third: it carries the fair market value and adjusted basis of securities and property, which decide gain under section 731(c) and the partner's basis in distributed property. For a partner who received property, the reviewer also confirms that a Form 7217 is attached for each distribution date and that the basis assigned to the property carries into the partner's own depreciation or sale records.
Every line checked against the documents the client sent
Filed reads the partner's K-1, the box 19 statement and the prior-year basis worksheet, then checks every distribution against basis and the lines it feeds. Anything that doesn't tie comes back as a review item with a citation to the source.
Book a demoBox 19 code A shows $60,000 and the basis worksheet shows $52,000 of basis before distributions, plus a $5,000 liability decrease in item K1. No gain appears on Form 8949. Confirm whether $13,000 of gain on the partnership interest should be reported.
Common questions
Are K-1 box 19 distributions taxable?
K-1 box 19 distributions are generally not taxable, because they reduce outside basis instead. Under IRC section 731(a)(1), a partner recognizes gain only when money distributed, including marketable securities and deemed distributions from liability decreases, exceeds their adjusted basis immediately before the distribution. Property other than money doesn't create gain under section 731, though section 737 can apply to code B.
Does K-1 box 19 include guaranteed payments?
K-1 box 19 doesn't include guaranteed payments for services. The 2025 partner's instructions say the partnership reports those in box 4a, and payments to a partner acting in a non-partner capacity are reported under section 707(a)(1). Codes F and G cover only distributions to a partner for services that the partnership treats as a distribution.
What is K-1 box 19 code D?
K-1 box 19 code D reports deemed distributions of money from a net decrease in the partner's share of partnership liabilities, plus any decrease in the partner's own liabilities the partnership assumed, under section 752(b). It reduces basis like cash, and any amount above basis is gain from the sale or exchange of the partnership interest.
Sources
- IRS, Partner's Instructions for Schedule K-1 (Form 1065) (2025)
- IRS, Instructions for Form 7217 (December 2024)
- IRC section 731, recognition of gain or loss on distribution
- IRC section 752, treatment of certain liabilities
- Treas. Reg. 1.731-1, extent of recognition of gain or loss on distribution
- IRC section 733, basis of distributee partner's interest