K1 Form 1065

[Fred Beville]

I have a question about k1 reporting. I invested $100K in a real estate multi-family apartments, so that is the 

Beginning capital .  The property was sold and distributions was the initial $100K plus $34,047 return for total distributions of $134, 047. Net income line is $56,134, but the net gain is $34,047.

there is an ending capital of $22,087. What does this mean since there would not be any more distribuitons

[Mike9241]

two likely possibilities 1) the amount represents syndications costs  Reg 1.709-2(b) which are different from start-up expenses. They are neither deductible nor amortizable Reg 1.709-1(a). 2) the return preparer has made an error either in the prior or the current year returns. but there could be other reasons. we can't see the returns, 

your tax basis starts with the $100K then goes up by your share of the net income and down by your share of the net loss and distributions.    contact the preparer or seek the advice of a tax pro.

[Rick19744]

We don't have sufficient facts to provide a proper response:

• There is no detail of how long you have owned this investment
• Have you been maintaining your tax basis in the investment?  This is the only accurate way to understand what the results of the liquidating distribution would be.  This is a key component.
• The $134,047 figure has no bearing on the original investment.  
• The net gain amount of $34,047.  Where exactly are you getting this amount; from the K-1?

[Fred Beville]

Hello, 

I had the investment for 1 year

not sure what you mean by following the tax basis,

this was a real estate investment partnership, and the property was bought , renovated and sold much sooner than expected.

the original investment was 100,000, and the net money including the original investment and the 34,047 was distributed. If put 100,000 into the investment, and get a end result of 134,047, I would assume the gain would be 34,047.

But the current year income is 56,134, 

distributions is 134,047

ending capital account is 22, 087

this does not make sense, I have not received the 22,087

[Rick19744]

Response based on your reply:

• As a partner in a partnership (or a member in an LLC taxed as a partnership), you need to maintain a tax basis in your investment.
• Since this is only a single year, this appears straight forward; assuming your facts have not left out any K-1 line items.
• Your tax basis begins with the $100,000 investment.  It is increased by the pass-through of your share of the partnership income of $56,134.  This means your tax basis is now $156,134.
• Make sure you enter the $56,134 in the K-1 section of TT. 
• The following only applies if this is a final K-1.
• You received a liquidating distribution of $134,047.
• You need to indicate in TT that this is a final K-1.
• TT will ask questions regarding the "sale" of your partnership interest.
• When those questions are asked, you need to reflect the $134,047 as the sales price and $156,134 as your cost basis.  This will then provide you with a capital loss of $22,087.  
• This $22,087 agrees to your ending capital.

If this isn't a final K-1, then your $22,087 just remains and will be adjusted by additional K-1 activity.  This now becomes your tax basis going forward.