First a K1 implies this is a partnership or S Corp and generally you would expect to see convertible debt investments in a C Corporation, which does not issue K1's.u00a0 Still not totally impossible to have convertible debt in a pass-through tax entity, but as long as it is debt and not equity there is no equity interest to be reported on the K1.u00a0 Be sure the debt instrument does not grant them some profit sharing interest pre-conversion.