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keuka1
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Form 1065 converting rental property to primary residence

I am a 2 partner LLC (my husband and I).  I have Turbotax desktop business.  I file form 1065.  We have numerous rental properties.  In 2023 we converted one property to our primary residence.   On the asset side I said we disposed of it.  On the rental income side I disposed the property in a like kind exchange and said it was sold to a related party.   However, my K1 is showing a massive loss coming from form 4797.  My understanding is that on my 1065 it should be a non taxable transaction, showing no gain or loss.   I'm not sure what I'm doing wrong.  I also said how many days were rented and how many were personal use.  I feel like I'm missing something. Thanks.

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Form 1065 converting rental property to primary residence

there was no sale of the property for tax purposes and generally no gain or loss is recognized for tax purposes on distribution unless your outside tax basis goes negative. 1/2 of the partnership basis in the property gets charged to each partner's capital account.   that becomes your basis in the home. you are also responsible for depreciation recapture on the depreciation taken by the partnership when you sell the property.  

 

see   this article

https://thismatter.com/money/tax/partnership-distributions.htm 

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