P3 review: asset bases and the tax-basis K-1

Schema 13 is as shipped and the asset columns are schema 14 (shipped
migrations pinned by hash); the tax-basis K-1 leaves net income open (only
the return has it) and takes a contributed prepaid plan at its book amount
as its section 723 basis; a disposal of contributed property names its
704(c) gain or loss; aliases compare by meaning; fixture amounts made up.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
Claude-Session: https://claude.ai/code/session_01T3gXMVt7XJPi6ens1or9Dj

docs/mcp-interface.md

@@ -605,7 +605,7 @@ life's last day is 9999-12-31 at the latest.
   name's initials without LLC/Inc; "FA" when none). `in_service_date` (the
   day it is ready and available for its use) starts depreciation (P3,
   defect 13; B-15); `purchase_date` is its alias for one release (both
-  given and different: refused; the alias noted in `notes`). The
+  given and meaning different days: refused; the alias noted in `notes`). The
   `acquisition_entry` (posted, debiting the cost account, dated on or
   before the in-service date) gives `acquired_date`, which puts the asset
   on the register; with none, the acquired date is the in-service date.
@@ -632,11 +632,16 @@ life's last day is 9999-12-31 at the latest.
   `accumulated_posted` (what the books carry: its depreciation runs, less
   reversals, a reversal of a reversal reinstating),
   `accumulated_scheduled_through` (what the schedule says is due by
-  `as_of`), `unposted_depreciation` (the difference: run
-  `books.run_depreciation`), `book_value` (cost less posted: what the
-  books carry), and `basis` (as `books.set_asset_tax_basis` reports it).
-  Disposed by `as_of`: every figure 0.00; acquired after `as_of`: the
-  figures null. The rows are the register's (`fixed_asset_register`). An
+  `as_of`), `unposted_depreciation` (the difference for this asset, its
+  schedule less its runs: run `books.run_depreciation`; the register's
+  total `unposted_depreciation` compares the schedules with the general
+  ledger instead, so a hand entry in accumulated depreciation shows there,
+  as `unattributed_accumulated`, not here), `book_value` (cost less
+  posted: what the books carry), and `basis` (as
+  `books.set_asset_tax_basis` reports it). `cost` is always the
+  capitalized cost; `held` says whether the books carry it. Disposed by
+  `as_of`: every other figure 0.00; acquired after `as_of`: those figures
+  null. The rows are the register's (`fixed_asset_register`). An
   asset whose figures can't be computed (one an earlier version took)
   lists with them null and `schedule_error` saying why: one bad asset
   never fails the list.
@@ -675,6 +680,9 @@ life's last day is 9999-12-31 at the latest.
   Refused while the books carry depreciation for it (a run posted and not
   reversed), and for an in-service date before its acquisition entry's
   date; `in_service` is the alias of `in_service_date` for one release.
+  A recorded value at contribution, and so the built-in gain, never
+  moves; a basis recorded before P3 has none and reads it as the book
+  cost, so a cost correction moves its built-in gain, and `notes` says so.
 - `books.run_depreciation { period: "YYYY-MM", asset_id? }`
   → `runs: [{ asset_id, description, period, amount, caught_up, entry_id,
   already_posted }]` and `skipped: [{ asset_id, description, reason }]`.
@@ -731,7 +739,9 @@ life's last day is 9999-12-31 at the latest.
   salvage, useful_life_months, accumulated_scheduled, accumulated_posted,
   book_value, status, proceeds, basis_rule, contributor_adjusted_basis,
   fmv_at_contribution, fmv_recorded, tax_basis_723, depreciable_basis,
-  built_in_gain_704c, sec704c_method, basis_source`, then a TOTAL row.
+  built_in_gain_704c, sec704c_1c, sec704c_method, basis_source`, then a
+  TOTAL row; `sec704c_1c` is `true` for a built-in loss (IRC
+  §704(c)(1)(C)), blank without a contribution basis.
 - `books.show { asset }` opens an asset in the viewer; `page: "assets"`
   and `report: "fixed_asset_register"` open the register.
 

docs/spec/rules.md

@@ -234,8 +234,8 @@ earnings the same running way, D-38, 2026-10-20)
   analysis "is based on the partnership's books and records" (the Partner's
   Instructions' Basis Limitations section, `sources/irs-partnerships.md`;
   not Item L, which an earlier version of this rule spliced in). The K-1
-  worksheet is the book capital analysis, which the CPA converts for
-  Item L.
+  worksheet carries the book capital analysis, and beside it the tax-basis
+  capital as far as the books know it (B-36).
 - **No authority** says how to round a share to the cent. Largest
   remainder, ties to the member listed first: DECISION (the owner,
   2026-10-13). Closes made before then replay with the last member
@@ -2467,20 +2467,29 @@ book capital reconciles to tax capital:
   gain or loss at contribution, shared within the entry as its book value
   is (B-13). Property contributed with no basis in the books (no
   registered asset linked to the entry holds a contribution basis for it)
-  is open.
-- What the books can't know is never guessed: the tax depreciation of
-  every fixed asset in service (MACRS, and for contributed property the
-  §704(c) method's allocation: the CPA's, B-15), the tax gain on a
-  disposal, the adjusted tax basis of property distributed, the tax
-  treatment of a change in book capital the books can't explain, and
-  last year's tax ending when an earlier year left a figure open. Each
-  such line is left blank and marked open, with what the books know so
-  far and the book amount the CPA's figure replaces. The book
-  depreciation the tax figure replaces is the period's depreciation
-  expense, the P&L's: each asset's runs and what its disposal entry posts
-  to its expense account (B-15 rule 8; before the seam review the runs
-  alone, so a disposal that credited back part of a month's run stated
-  more than the P&L).
+  is open. Property contributed to a prepaid account (the balance
+  account of a prepaid-expense schedule: a service contract the member
+  handed over, B-13) with no fixed asset for it enters at its book
+  amount, with a note: a contract's carryover basis is what the books
+  recorded for it (DECISION, P3 review 2026-10-21; the CPA to confirm).
+- What the books can't know is never guessed. The share of net income
+  "as figured for tax purposes" is the return's, always: the books are
+  kept on their own basis, and every book-tax difference (Schedule M-1)
+  is the CPA's; so is the ending, and the beginning of any year after
+  the first (Item L: "the partner's ending capital account as
+  determined for last year"). The line names the differences the books
+  do see: the tax depreciation of every fixed asset in service (MACRS,
+  and for contributed property the §704(c) method's allocation: the
+  CPA's, B-15), and the tax gain on a disposal, with a contributed
+  property's built-in gain or loss at contribution, which that gain must
+  take account of (IRC §704(c)(1)(A)). Also open: the adjusted tax basis
+  of property distributed, and the tax treatment of a change in book
+  capital the books can't explain. Each such line is left blank and
+  marked open, with what the books know so far and the book amount the
+  CPA's figure replaces.
+  The book depreciation the tax figure replaces is the period's
+  depreciation expense, the P&L's: each asset's runs and what its
+  disposal entry posts to its expense account (B-15 rule 8).
 - The reconciliation: book ending less tax ending (as far as the books
   know it) = beginning (book less tax) + the built-in gain or loss share
   + property without a basis (at book) − property distributed (at book),

docs/spec/sources/irs-partnerships.md

@@ -61,7 +61,7 @@ Source: <https://www.irs.gov/instructions/i1065sk1>
 Retrieved: 2026-10-20  
 SHA-256 of the retrieved file (`i1065sk1.html`): `d7d6298286601fd95ab8e445c10fd62499ea1e37f8e5c3531f8e1783862d8d03`
 
-**Item L, its first paragraph** (the partner's capital account, on the tax basis; the K-1 worksheet carries the book capital account, which the CPA converts)
+**Item L, its first paragraph** (the partner's capital account, on the tax basis; the K-1 worksheet carries the book capital account and, beside it, the tax-basis one as far as the books know it, rules.md B-36)
 
 > The partnership must report your beginning capital account and ending capital account for the year using the tax-basis method, including the amount of capital you contributed to the partnership during the year, your share of the partnership’s current-year net income or loss as computed for tax purposes, any withdrawals and distributions made to you by the partnership, and any other increases or decreases to your capital account determined in a manner generally consistent with figuring the partner’s adjusted tax basis in its partnership interest (without regard to partnership liabilities), taking into account the rules and principles of sections 705, 722, 733, and 742. See the Instructions for Form 1065 for more details.
 

docs/testing.md

@@ -1579,8 +1579,14 @@ basis. Mutation runs wait for P12 (D-33); none was run.
   `record_depreciation_run`); `tax_capital.rs` (tax-basis capital per
   member with a cash contribution, a contribution of property, a
   distribution and a year of depreciation; next year's beginning; cash-only
-  books; property without a basis; property distributed; the roll-forward
-  and reconciliation over spans); `properties.rs`
+  books, whose tax income is still the return's; property without a basis;
+  property distributed; the roll-forward and reconciliation over spans;
+  and, from the P3 review, four devices and a prepaid plan by hand (two
+  worth less than basis, one more, one equal; the plan at book with its
+  note; the gain property's disposal flagged with its built-in gain),
+  property subject to a liability (negative tax property), and three
+  members with unequal shares, one contributing nothing);
+  `spec_asset_basis.rs` `a_duplicated_run_line_is_carried_once`; `properties.rs`
   `prop_basis_figures_laws` (5,000 cases); `kernel_bridge.rs`
   `basis_figures_agree`; Kani `basis_figures_laws` (`src/proofs.rs`, 83
   checks, its cover satisfied); `spec_asset_tags.rs` (the register's
@@ -1591,8 +1597,11 @@ basis. Mutation runs wait for P12 (D-33); none was run.
   line whose figures disagree with today's formula still replays; an
   unknown rule or method is newer, a malformed figure corrupt; pre-P3
   `asset.tax_basis_set` lines give the figures they gave; P2's v12
-  database left as it is while this version builds its v13 file, runs
-  keyed by entry (`a_p2_database_is_left_and_v13_built_from_the_journal`);
+  database left as it is while this version builds its v14 file, runs
+  keyed by entry (`a_p2_database_is_left_and_this_versions_built_from_the_journal`);
+  a v13 file as it shipped before the basis columns left too and v14
+  built (`a_v13_file_built_before_the_basis_columns_is_left_and_rebuilt`;
+  `schema_files.rs` `a_shipped_migration_never_changes`);
   v9 and v10 databases under this version's name rebuilt). The old books
   (`books_an_earlier_version_wrote_open_to_its_figures`) open to exactly
   their figures.