home / skills / a5c-ai / babysitter / k1-generator

k1-generator skill

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/plugins/babysitter/skills/babysit/process/specializations/domains/business/venture-capital/skills/k1-generator

This skill generates Schedule K-1s and handles complex tax allocations for partnerships, ensuring accurate reporting and compliance for fund distributions.

npx playbooks add skill a5c-ai/babysitter --skill k1-generator

Review the files below or copy the command above to add this skill to your agents.

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SKILL.md

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---
name: k1-generator
description: Generates K-1 schedules for partner distributions with tax allocations
allowed-tools:
  - Read
  - Write
  - Glob
  - Grep
  - Bash
  - WebFetch
metadata:
  specialization: venture-capital
  domain: business
  skill-id: vc-skill-041
---

# K1 Generator

## Overview

The K1 Generator skill produces Schedule K-1 tax documents for limited partners, handling complex tax allocations including carried interest treatment under IRC Section 1061. It ensures accurate, timely tax reporting for fund distributions.

## Capabilities

### K-1 Preparation
- Generate Schedule K-1 forms
- Calculate partner tax allocations
- Handle tiered partnership structures
- Support state K-1 requirements

### Tax Allocation
- Allocate income by character (ordinary, capital gains)
- Handle qualified opportunity zone provisions
- Apply Section 1061 carried interest rules
- Manage tax basis tracking

### Distribution Reporting
- Report distributions to partners
- Track return of capital vs. gains
- Handle installment sale treatments
- Manage escrow release allocations

### Compliance Support
- Generate required tax schedules
- Support LP tax planning
- Provide allocation explanations
- Track filing deadlines

## Usage

### Generate K-1s
```
Input: Fund activity, partner data
Process: Calculate allocations, generate forms
Output: K-1 documents by partner
```

### Calculate Tax Allocations
```
Input: Fund income/loss, allocation provisions
Process: Apply allocation methodology
Output: Partner allocation schedules
```

### Handle Distribution Reporting
```
Input: Distribution data
Process: Classify and allocate
Output: Distribution reporting schedules
```

### Prepare State K-1s
```
Input: State allocation data
Process: Generate state-specific K-1s
Output: State K-1 documents
```

## K-1 Components

| Component | Description |
|-----------|-------------|
| Box 1-3 | Ordinary income/loss |
| Box 8-10 | Capital gains/losses |
| Box 11 | Section 1231 gains/losses |
| Box 13-20 | Other items |
| Schedules | Supporting detail |

## Integration Points

- **Distribution Waterfall Calculation**: Allocation basis
- **Waterfall Calculator**: Distribution data
- **Tax Coordinator (Agent)**: Support tax work
- **Fund Accountant (Agent)**: Coordinate accounting

## Tax Considerations

| Consideration | Treatment |
|---------------|-----------|
| Section 1061 | 3-year hold for LTCG on carry |
| QSBS | Section 1202 exclusion tracking |
| State Taxes | State-specific allocations |
| Foreign Partners | Withholding requirements |

## Best Practices

1. Start K-1 preparation early in year-end
2. Coordinate with fund tax advisors
3. Provide LP tax planning estimates
4. Document allocation methodology
5. Track basis and capital accounts accurately

Overview

This skill generates Schedule K-1 tax documents for partners and limited partners, handling complex allocations and distribution reporting. It automates calculation of partner tax allocations, supports state-specific K-1s, and applies specialized rules like carried interest under IRC Section 1061. The goal is accurate, timely K-1 production to support filing and LP tax planning.

How this skill works

The skill ingests fund activity, partner data, and distribution waterfall inputs, then applies allocation methodologies to compute partner-level items by character (ordinary income, capital gains, etc.). It produces federal and state K-1 forms and supporting schedules, tracks basis and capital accounts, and annotates items that require special treatment such as Section 1061 carry or QSBS tracking. Outputs include per-partner K-1 documents, allocation schedules, and compliance notes to assist tax advisors.

When to use it

Year-end K-1 preparation and issuance to partners
Interim reporting when distributions or adjustments occur
When applying carried interest or Section 1061 rules
Generating state-specific K-1s for multi-state funds
Preparing supporting allocation schedules for tax advisors

Best practices

Start K-1 preparation early and lock allocation methodology before year-end adjustments
Coordinate closely with fund tax advisors and the fund accountant to reconcile inputs
Document allocation rules and waterfall calculations for auditability
Track partner capital accounts and tax basis continuously, not just at year-end
Annotate special items (installment sales, escrow releases, QSBS, Section 1061) with supporting detail

Example use cases

Produce federal and state K-1s after closing fiscal year activity and distributions
Calculate carried interest recharacterization under Section 1061 for applicable partners
Generate partner-level allocation schedules for LP tax planning and advisor review
Classify distributions as return of capital versus gain and report accordingly
Prepare K-1s for tiered partnership structures and consolidated waterfall outputs

FAQ

Can the skill handle multi-state K-1 requirements?

Yes. It supports state-specific allocation inputs and produces state K-1 documents alongside federal forms.

How does it treat carried interest under Section 1061?

The skill applies Section 1061 rules to identify and recharacterize long-term capital gains on carry where the statutory holding period is not met, and it annotates related adjustments on partner schedules.

What inputs are required to generate accurate K-1s?

Fund activity (income, gains, losses), detailed partner ownership and allocation provisions, distribution waterfall data, and state allocation information are required for accurate outputs.