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Yes and No. Yes, there is something else to do besides enter the FMV for the distributions and no, don't enter the FMV as the distribution. You need to enter the Partnership's Adjusted Basis for the distribution amount.
Your basis is another term for the value of your investment in the company as of a specific date. The "FMV" represents value at the point of transfer - so the ending value in the Partnership and the beginning value in the REIT. This value is calculated from your initial purchase (or investment), which is represented by "Partnership's Adjusted Basis", plus or minus any income or loss over the operating years minus any other distributions taken over the years. The "adjustments" have been reported in various boxes of your K-1s throughout your ownership and have already been reflected on the appropriate year's returns. So, since the FMV is less than the Partnership's Adjusted Basis you have already reported this loss. If you enter this FMV this year, you will be "doubling" the loss you have experienced and your return will be delayed and adjusted by the IRS.
@scpanish
You need to enter your K-1 as you have in previous years with the exception of marking that the "partnership ended in 2021" and "Disposition was not via a sale". You will then be asked for a "Purchase Date", which is the date you invested, and a "Sale Date", which is the date your investment was transferred to the new REIT. Continue through the rest of the interview with the details that are shown on your K-1.
See Where do I enter a K-1 that I received? if you need more information on how to enter your K-1.
Thank you Alicia. I apologize for the lack of clarity. My problem is with the K-1 box 19 code C entry. Turbo Tax wants a single "distribution" amount. My K-1 instead has two figures, a "Fair Market Value" ($29K) which is what really was the investment to the new REIT, and a "Partnership's Adjusted Basis" ($36K). If I enter the FMV and finish the return there are no errors. But this does not capture the reality that there is a loss, which I think is roughly the $29K minus the $36K, or about $7K. So I wonder if just entering the FMV as the value will get me into trouble further down the line, or misses a deduction. Is there something to do other than enter the FMV as the distribution? Thanks for your attention.
Yes and No. Yes, there is something else to do besides enter the FMV for the distributions and no, don't enter the FMV as the distribution. You need to enter the Partnership's Adjusted Basis for the distribution amount.
Your basis is another term for the value of your investment in the company as of a specific date. The "FMV" represents value at the point of transfer - so the ending value in the Partnership and the beginning value in the REIT. This value is calculated from your initial purchase (or investment), which is represented by "Partnership's Adjusted Basis", plus or minus any income or loss over the operating years minus any other distributions taken over the years. The "adjustments" have been reported in various boxes of your K-1s throughout your ownership and have already been reflected on the appropriate year's returns. So, since the FMV is less than the Partnership's Adjusted Basis you have already reported this loss. If you enter this FMV this year, you will be "doubling" the loss you have experienced and your return will be delayed and adjusted by the IRS.
@scpanish
Thanks Alicia. That is exactly what I needed to know.
Hi,
I have a similar situation where the Fair Market Value being transferred is higher than the basis.
So the partner exiting out Capital Account balance is going to Zero. But the Fair Market Value being transferred is showing up on line 19c. Do we need to show the Fair market value being transferred as distributions as well?
I suggest reading Partners Instructions for Schedule K-1 , look for the instructions given for Box 19 Code C-Other property. This seems to suggest that the FMV is not treated as a distribution but is reported in a statement, included with a K-1, given to a partner.
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