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Timothy’s Question:

Typically when I see a distribution along with a capital contribution on a K-1 I'll net the two numbers and input the net number in the personal cash flow.  What if there is no distribution but a capital contribution, should the capital contribution be deducted from the personal cash flow?

David’s Answer: 

My first question would be if the capital contribution looks like a one-time or unusual situation. Throughout my experiences, I often find capital contributions as atypical; owners investing funds to cover losses, or assisting with financing a one-time purchase of an asset to support future growth plans. If it is clear, nonrecurring that is, I might not count it at all for projections.

 With that in mind, I am assuming you are talking about a minority owner (say <25% owner), because with more than 25% ownership I would be looking at the full tax return of the entity; the analysis would provide clarity as to what is happening in the business with cashflow.

 Finally, if you believe the capital contribution is typical, and there is no distribution, you might end up with a negative number flowing into the personal analysis.

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