How do i report a transfer of partnership interest from an individual to a partnership. I'm sure what box to check.

I formed a new partnership in 2017. I transferred my ownership interest in several partnership that i owned individual to this newly formed partnership. I received 2 k-1s. I need to check the box for the final k-1 in my 1040, but none of the questions apply?

5774

1 Best answer

Level 13

Jun 6, 2019 12:18:04 PM

Comments on your issue:

While you did not technically sell or liquidate the "old" partnership interest you will need to handle it in TT as if you did sell it. This is the only way to eliminate it from your return going forward.
As a partner in a partnership you should be maintaining your basis in this investment. Hopefully you have this.
My recommendation is to indicate in TT that you disposed of and sold your interest. In order to not generate any gain or loss, just use your tax basis as the selling price. Since your basis and selling price will be the same, no gain or loss will be recognized.
Now for the technical issues. When you contributed property to a partnership and the FMV is not equal to your basis, then there are special rules that need to be addressed. These rules fall under Section 704(c) and also the built-in gain or loss rules. These can be complicated and not really something that can be discussed in a forum such as this. I recommend you follow-up on these issues and possibly consult with a tax professional to make sure it is handled correctly.
Finally, your beginning tax basis in the new partnership is your tax basis in the partnership interest you contributed.

Level 13

Jun 6, 2019 12:17:59 PM

Is your new "partnership" a single member LLC or is it truly a multi-member partnership?
How have you notified the partnership that you invested in of this change?

Level 2

Jun 6, 2019 12:18:01 PM

Multi-Member. Yes, the transfer documentation was executed. The Pship returns were prepared correctly. I have a final return that i need to deal with on my 1040. There aren't a lot options for a final return.

Level 2

Jun 6, 2019 12:18:02 PM

Makes sense. Thank you so much!

Level 13

Jun 6, 2019 12:18:04 PM

Welcome

Level 13

Jun 6, 2019 12:18:04 PM

Comments on your issue:

While you did not technically sell or liquidate the "old" partnership interest you will need to handle it in TT as if you did sell it. This is the only way to eliminate it from your return going forward.
As a partner in a partnership you should be maintaining your basis in this investment. Hopefully you have this.
My recommendation is to indicate in TT that you disposed of and sold your interest. In order to not generate any gain or loss, just use your tax basis as the selling price. Since your basis and selling price will be the same, no gain or loss will be recognized.
Now for the technical issues. When you contributed property to a partnership and the FMV is not equal to your basis, then there are special rules that need to be addressed. These rules fall under Section 704(c) and also the built-in gain or loss rules. These can be complicated and not really something that can be discussed in a forum such as this. I recommend you follow-up on these issues and possibly consult with a tax professional to make sure it is handled correctly.
Finally, your beginning tax basis in the new partnership is your tax basis in the partnership interest you contributed.

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How do i report a transfer of partnership interest from an individual to a partnership. I'm sure what box to check.