K1 and Disolution of limited partnership

[Rick19744]

Here are my comments @plawlor78 :

• I have a number of questions and unknown facts and a forum such as this is not really conducive to address a back and forth in most matters
• I don't know your definition of "big losses", but based on that terminology, I recommend you meet with a tax professional after April 15th......doubtful you can get someone's attention before then.
• You should bring all your K-1's to the meeting.  I would also think you should have separate K-1's for the Oregon and Montana allocations.  I don't know the allocation of the losses nor the current year income.
• Hopefully you know your tax basis for this investment and there most likely are differences between the federal and states.
• Another issue is that the statute of limitations has not started (tolled) when you haven't filed a tax return and should have.  Not sure how long this has been going on, but this may add to the murkiness of this matter.  If it has been awhile, to hopefully a lessen late filing penalties, the tax professional could attempt to start a voluntary disclosure with Oregon and Montana.  They can begin this process anonymously to see if the state is open to doing so.  Since there is activity in those states, it most likely is just a matter of time before you receive a letter from either or both states.
• I recommend filing your usual returns, meet with a tax profession and address Oregon and Montana.  You most likely will need to amend California at some point.

[plawlor78]

Hi @rick. Thanks for the reply and guidance.

• Agreed that this forum is not conducive for complicated conversations. If there is any specific other information that you want, then let me know.
• By big loss, I mean that the rental loss in the first year of operation was about equal to my entire initial investment.
• Yes, I have been receiving federal K-1s as well as the state K-1s for several years. One K-1 goes back to 2017 for federal K-1s, but the state K-1s started showing up in 2019 (must have been when the partnership actually purchased the properties).
• I do know the adjusted cost basis for federal (I think). I'm a bit less certain about the state's adjusted cost basis. Do you have a pointer to how to do that calculation? And keep track of it over the years?
• Unfortunately, this has been going on since 2019, and I have other partnership K-1s (some with Oregon property as well). I was unaware that I needed to file in states when I had no income, only losses. On a positive note, I think if anything, I have been overpaying taxes since the partnership did withhold taxes for these nonresident states for any time I had income. I don't think that I owe any money. Would there still be any penalties?
• Rather than filing my usual tax return, should I file an extension and try to meet with a tax professional to get my 2024 taxes correct?

[Rick19744]

Follow-up to your reply:

• Based on your additional facts, you should have filed Oregon and Montana (assuming the same year) since 2019.
• Whether the partnership was withholding nonresident tax was one of my questions.
• While you may not owe in either state due to prior losses, you may still be subject to a late filing penalty.  I have not researched either of these states.  Just stating what could occur.
• The state tax basis will be different than the federal if a state has different depreciation allowances.  Not all states follow federal, so this difference would cause a state tax basis to vary from the federal.  This will impact loss allowances and any gain or loss upon disposal.
• Based on the facts, you could file your federal and extend California.
• I would NOT extend either Oregon or Montana.  Since you haven't filed anything in the past, this may cause an issue with the voluntary disclosure request.
• Don't procrastinate if you want to enter into a voluntary disclosure program as this will be disallowed if you receive any notice from the state.

[plawlor78]

Thanks @rick  for the additional answers. I agree with what you wrote, except a couple of clarifications:

• For state tax basis. How would I be able to tell if the the federal and state have different depreciation allowances? Also, since the K-1 has multiple states, should the Oregon adjusted tax basis be different than the Montana tax basis (since I imagine the the investments in the states were different -- where would I see that?). Should the sum of all the state tax bases be close to equaling the federal tax basis? I'm trying to create the correct mental model in my head for how this is supposed to work.
• I don't know anything about voluntary disclosure request. I did talk to one CPA briefly today, and he did recommend to file extension for Oregon and Montana. I did not bring up the voluntary disclosure request though.

I now plan to file an extension since I do not have much time before tax day and do not have an accountant (and they are all pretty much busy). I just need to figure out what to extend. I would probably extend federal as well since there is not much downside to that (even though I think that I did that correctly).

[plawlor78]

I learned that extending federal also automatically extends each other states where I would submit taxes, so I plan to just extend federal and continue to figure this all out.