The general partner is talking about selling the property for 4,200,000. I'm trying to understand what my tax liability will be? Is it 840,000 -(257000)=1,097,000 or ?
THE ANSWER IS ?
that's because the gain is the selling price less selling expense less the tax basis of the property sold. so if it was $1000K the gain would only be $3200k. your 20% share would be $640K. the k-1 will report your share of the gain and there will be a line (currently 9c) with the section1250 depreciation. This also assumes your inside and outside tax basis are the same. Normally that's the case. However, inheriting your share or buying your share from another partner could mean they are different. it's your outside basis that matters.
to give you some idea
your beginning of the year tax basis
-257K deficit capital + you share of liabilities of 395K = 138K
tax basis will go up by your share of the gain on sale
tax basis will go up or down based on operations and any other items of income or expense
tax basis will go down by the reduction in your share of liabilities at the beginning of year
this is your tax basis (see above caveat about inside/outside basis) before distributions.
any distributions in excess of this would be treated as additional long-term gain (assuming you held your interest for mor than 1 year). if less you'll have a capital loss for the remaining tax basis.
you are unlikely to receive $840,000. as part of the sale besides the sales expenses the liabilities would need to be paid off.
