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crhines
New Member

I need to know how to get the basis of a business sale from my K-1.

 
1 Best answer

Accepted Solutions
Rick19744
Level 12

I need to know how to get the basis of a business sale from my K-1.

First this is a public forum so I removed your phone number.  I am not an employee of TT just a user that provides guidance to individuals.  I do have significant partnership return experience.

The sale of a partnership interest (or LLC taxed as a partnership) can be complicated.  In general, when you sell your interest the LLC it is the sale of a capital interest.  However, there is an exception when the LLC has what the IRS calls hot assets.  In your case the hot assets would be at a minimum your share of depreciation recapture.  Treasury is wanting to make sure that you don't get capital gain treatment on property that generated an ordinary deduction (depreciation).  

Additionally, a member in an LLC is responsible for maintaining their basis in their investment.  This begins with your initial capital contribution and is adjusted annually for the applicable lines on your K-1.  You may need to locate your prior K-1's to determine your basis.  Alternatively, if your K-1 Section L has the "tax basis" box checked you could use that figure.  If that box is checked and you do use that figure the determination of your gain or loss it will be tricky depending on how the preparer of the return handled the liquidating distribution component.

So based on the above, it may be in your best interest to consult with a tax professional that is well versed in partnership tax.  You will also need to obtain your share of hot assets from Ardent.

The hot asset component is important as there could be a shifting in character recognition on the gain or loss.  This area is a trap for the unwary; including some tax professionals.

Hopefully the above provides some guidance.  If you have additional questions, let me know.

*A reminder that posts in a forum such as this do not constitute tax advice.*

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3 Replies
Rick19744
Level 12

I need to know how to get the basis of a business sale from my K-1.

Need some more information.
1) Did you sell your interest?
2) Complete or partial?
3) Partnership, LLC taxed as a partnership or S corporation?
4) Did the entity have fixed assets?
5) How long have you had your interest in the entity?
*A reminder that posts in a forum such as this do not constitute tax advice.*
crhines
New Member

I need to know how to get the basis of a business sale from my K-1.

Thanks for your reply Rick.

I had a .55% interest in an LLC taxed as a partnership (Ardent Services LLC). The company was sold in April of 2016. I am still employed by Ardent Services LLC with no ownership now. All of my interest was sold. Ardent Services does have fixed assets. Ardent Services was created in May of 2002. I have been with them since the inception.

My question is. " if I amend my return and answer the question about the company being sold using turbo tax, would the answers to the next series of questions that turbo tax will ask can be found on the K-1". If so, where. If not, tell me. I need to know if I have to get a CPA to find the answers. Please refer to case #xxxxxxxxx. You can also call me anytime at [redacted]
Rick19744
Level 12

I need to know how to get the basis of a business sale from my K-1.

First this is a public forum so I removed your phone number.  I am not an employee of TT just a user that provides guidance to individuals.  I do have significant partnership return experience.

The sale of a partnership interest (or LLC taxed as a partnership) can be complicated.  In general, when you sell your interest the LLC it is the sale of a capital interest.  However, there is an exception when the LLC has what the IRS calls hot assets.  In your case the hot assets would be at a minimum your share of depreciation recapture.  Treasury is wanting to make sure that you don't get capital gain treatment on property that generated an ordinary deduction (depreciation).  

Additionally, a member in an LLC is responsible for maintaining their basis in their investment.  This begins with your initial capital contribution and is adjusted annually for the applicable lines on your K-1.  You may need to locate your prior K-1's to determine your basis.  Alternatively, if your K-1 Section L has the "tax basis" box checked you could use that figure.  If that box is checked and you do use that figure the determination of your gain or loss it will be tricky depending on how the preparer of the return handled the liquidating distribution component.

So based on the above, it may be in your best interest to consult with a tax professional that is well versed in partnership tax.  You will also need to obtain your share of hot assets from Ardent.

The hot asset component is important as there could be a shifting in character recognition on the gain or loss.  This area is a trap for the unwary; including some tax professionals.

Hopefully the above provides some guidance.  If you have additional questions, let me know.

*A reminder that posts in a forum such as this do not constitute tax advice.*
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