Final K-1: how to fill out "Sale Information"?

[szlateva]

I'm on the Sale Information page of TT and I'm not sure how to fill it out using my final K-1 form.

Sale Price=?

Partnership Basis=?

Ordinary Gain=?

1250 Gain=?

From the final K-1 I have the following information:

Section L: 

Beginning capital acc = nothing

Capital contributed during the year = nothing

Current year income = $ 100 000

Other increase = nothing

Withdrawals = -$100 000

Ending = $0

Part III:

1. $0

2.-$14,634

5.-$1

9c. $10,516

10. $120,000

19.$100,000

20A. $1

20V. $71,635

20Z. STMT

I asked the broker for the information above, but he said everything is on the final K1

Please, help!

[jtax]

What kind of entity issued the K-1? A partnership (1065-k1)? if so was is it a publicly traded partnership? (Part I line D).

When did you invest in the entity? How much did you pay? Was 2020 the only year you had this investment?

Did you sell the investment or did the entity shut down? How cash or other property did you get? ($100k?)

This is a super complicated area of tax law. Advice you get from this free volunteer forum may not be worth much. You might be much better off hiring a CPA, enrolled agent, or tax attorney for professional advice.

See also IRS Pub 541, especially the section starting on page 9 about adjusting partnership basis.

https://www.irs.gov/pub/irs-pdf/p541.pdf

[Rick19744 · Accepted solution]

This is a K-1 from either a partnership or an LLC taxed as a partnership.

My comments are as follows:

• You should be maintaining a tax basis schedule of your investment in this partnership.  This is your responsibility.  Without this, you have no way to compute your overall gain or loss, which is exactly the information that TT is requesting.
• Based on the limited details, I am not sure everything syncs the way I would expect it to.  It also appears that you are reflecting a negative $1 for line 5 and that doesn't make sense.
• You can ignore line 20V as you are not a tax-exempt entity so unrelated business income does not apply to you.
• Bottom line is you need to compute your tax basis from the beginning and then adjust it for the applicable lines on this final K-1.
• The withdrawals amount may or may not be what you actually received upon exiting this partnership.  You need to know exactly what that amount is as this becomes your selling price.
• Your tax basis figure, once determined, is your cost basis.
• The difference will be your overall gain or loss.  See bullet #9.
• You will include line 9c when asked by TT, but this has no bearing on your tax basis or overall gain or loss.  This is the 1250 gain you refer to in your facts.  TT will use this information when determining your overall tax rate.
• The ordinary gain may not be applicable to you, however, without seeing the actual K-1 and statements I can't be certain.  This relates to your share of Section 751 gain.  This essentially recharacterizes some of your overall gain as ordinary instead of capital.  This is a confusing area for those that do not understand this matter.
• I also agree that it may be best to gather up all your past K-1's, your final K-1 and meet with a tax professional who can help you determine your tax basis.  As stated earlier, without this you are not able to compute your overall gain or loss.

[szlateva]

I'm a Limited domestic partner.

I invested in 2018.

The most difficult part for me is to figure out how much is the sale price which I have to put on the Salling Information page. Should I just use the number from part III,19A in 2020 K-1 or I should use the sum of all 3 years part III, 19A.

[Rick19744]

You use what ever the $$ amount is that you received when you sold the partnership interest; if line 19A is what you received, then that is your selling price.  However, I imagine it is some other amount based on the limited facts.  You should know exactly what this amount is as you received the funds.

[szlateva]

Yes, This was the amount for 2020

But I got one more amount  in 2019, which was reported again on 19A

Do I have to put the sum of both years for the selling price or just the amount from  2020?

[jtax]

But I got one more amount  in 2019, which was reported again on 19A

Do I have to put the sum of both years for the selling price or just the amount from  2020?

No because that wasn't sale proceeds. But you may have to adjust your basis because of prior year distributions or allocation of partnership income/loss, which results in the gain calculation. See Pub 541 page 10 "adjusted basis". https://www.irs.gov/pub/irs-pdf/p541.pdf

This is very complicated stuff.

[szlateva]

What about basis in the TT Sale information

Which basis did they ask for: outside or inside? 

Which basis should I include in the TT Sale Info sheet:  from the beginning of the year of sale or from the end (which is $0)?

If the previous year my all investment was reported like lost in Section L of K1, is this make outside base $0)?

[szlateva]

After many tryouts to get the right information on the Partner's Share of Income, Credits, Deductions, etc in TT forms, page 3, line 9, column (a), I think TT has a bug, or the page  Sale Information is not necessary, or they need to explain who or how to be used.

I found that if I fill it out correctly, using all discussion above, on the Partner's Share of Income, Credits, Deductions, etc in TT forms, page 3, line 9, column (a), I'm getting double the amount of my real profit, but if I put $0 for Sale price, Basis and Ordinary gain, the number on the Partner's Share of Income, Credits, Deductions, etc in TT forms, page 3, line 9, column (a) is right.

Is there a person who has the same problem with the TT Sale Information page?

[jtax]

Again partnership taxation is super complicated. There probably isn't a bug in TT, but there isn't a lot of hand-holding because of the complexity. TT will work if you know what you are doing and if not you're probably better off seeking professional advice.

I think (but you should verify) that TT is asking about outside basis for the disposition of your partnership interest. Inside basis is relevant to the partnership when it disposes of assets.

You are right that TT's K-1 Section A/B page 3/4 "passive activity adjustment to income or loss" is critical to understanding what is going on. That worksheet shows where the various items of income/loss from the K-1 is flowing, if any is suspended because of the passive activity loss rules, and if some was PAL disallowed in prior years but is now allowed during the year of the total taxable disposition of your partnership interest.

When you enter the info relating to the disposition the math should work out such that it is picking up only so much gain/loss as is not indicated elsewhere. (E.g. the "extra" gain will showup on line 6d and flow to schedule D. That might be zero because your adjust basis was reduced to zero by distributions that show up elsewhere in Section A/B with matching zero proceeds.

If all of your proceeds are already accounted for in the other lines on Section A/B, then they probably adjusted to zero. No proceeds and no "extra gain."

But that doesn't happen all the time with all partnerships.  Sometimes you get cash at the end and it doesn't show up as taxed on the other Section A/B lines. Then TT figures the gain and puts in in the right place. It sounds like you had no proceeds from the sale that were not taxed on their own right.

But this is so super complex, so you should verify this all with your own research and/or professional advice.