Case Study
Multi-Entity K-1 Income from International Operations Misreported Across Three Years Corrected, RSU and Portfolio Planning Integrated Into Ongoing Engagement
The Problem
An executive who relocated from California to Charlotte with over $10 million in annual K-1 income from pass-through entities with international operations had three years of materially misstated returns. The underlying businesses generated GILTI and Subpart F inclusions that the prior firm had failed to properly include in income, report at the correct amounts, and coordinate against the foreign tax credit. Basis was tracked incorrectly across the partnerships. The combined exposure required coordination with outside counsel through a voluntary disclosure process before corrected filings could be submitted. The client also held RSU grants from a Charlotte employer with no pre-vesting planning, a taxable investment portfolio that had never been reviewed for tax efficiency, and a significant cryptocurrency portfolio with incomplete cost basis records, unreported transactions across multiple exchanges, and 1099-DA reconciliation issues requiring reconstruction before accurate filings could be produced.
What We Did
Reviewed three years of returns against the underlying K-1 documentation, partnership agreements, and international tax reporting. Corrected the foreign tax credit calculations against the inclusion amounts and recalculated basis and passive activity positions across all entities. Coordinated with outside counsel throughout the voluntary disclosure process, aligning corrected filings with the legal strategy. Filed amended returns for all three years with full supporting documentation. Reconstructed the cryptocurrency cost basis across all exchanges and wallets, reconciled third-party 1099-DA data against the reconstructed records to resolve reporting mismatches, and produced accurate digital asset tax filings for all affected years. Established RSU vesting projections to address the withholding gap, initiated a multi-year diversification plan for the concentrated stock position, and addressed portfolio tax-loss harvesting before year-end. Engagement now covers all entity K-1s, inclusion income, foreign tax credit planning, digital asset compliance, equity compensation, and investment portfolio on an ongoing annual basis.
The Outcome
Three years of amended returns filed with corrected inclusion income, foreign tax credit calculations, and basis positions. Voluntary disclosure completed in coordination with outside counsel. Cryptocurrency cost basis reconstructed across all exchanges, 1099-DA reconciliation completed, and accurate digital asset filings produced for all affected years. RSU withholding gap addressed through adjusted quarterly estimates. Concentrated stock diversification plan in place. Client now under a single integrated engagement covering multi-entity K-1s, international inclusions, digital asset compliance, equity compensation, and portfolio tax planning across the full year.
