My family has a LLP (partnership). In 2021 they moved a commercial property out of the partnership into the individual names of the partners as advised from their real estate attorney so they could complete an exchange (1031) individually outside of the LLP. On the partnership K1 we have a section 10 "Net Section 1231 gain" of $44,939 and a section 19 "Distribution" of $55, 998. We did an exchange through an intermediary and completed the exchange (1031) without touching any of the funds which is recorded on our form 8824. I can link the K1 to the 8824 which shows up on the form 4797 in Part I as a positive $44,939 but it seems like with the exchange it should show a negative -$44,939 which would be the exchange funds. (I think this because my mother-in-law did the same thing in 2020 and that's how her accountant did it.) I can manually override the 4797 to get that but wonder how I can do it through the Turbo Tax Step by Step instructions. When I over ride the form 4797 Turbo Tax gives me an error that says I cannot file electronically by doing that.
It seems to me I am paying tax on the partnership gain or distribution which was reinvested through an exchange and shouldn't have a tax consequence.
You cannot e-file with most overrides; the program will not allow it.
Did you use a tax professional for the LLP return? You might want to seek professional guidance for your individual income tax return in this instance.
This scenario is complicated due to the distribution of the property from the LLP and then due to the 1031 exchange.
We did use a tax professional for the Partnership return. Thanks I will try to contact them.