Schedule D - Unrecaptured Section 1250 Gain Worksheet - Line 10

[romakulus1]

Hello, I'm using TurboTax Premier 2022 and am wondering how do I put an entry on Line 10 of the Unrecaptured Section 1250 Gain Worksheet for Schedule D without using the Override function? In 2022, I sold my interest in a partnership (LLC) which had unrecaptured section 1250 gain. The partnership's business is in rental real estate and had not sold any assets when I sold my interest in the partnership. I went into the Forms view in TurboTax and clicked to find the Sources for Line 10 in TurboTax, but it keeps freezing on me and I have to restart the program.

As an alternative, I started entering the assets in Form 4797, but technically, the assets (rental property) haven't been sold yet, so using Line 1 of the Unrecaptured Section 1250 Gain Worksheet for Schedule D seems to be the better approach.

Thanks in advance for your help and have a good day.

[tagteam]

Did you receive a final K-1 from the LLC?

I am going to page @Rick19744 since he typically has valuable input.

[Mike9241]

the unrecaptured 1250 gain should be on line 9c of the k-1 if it's not perhaps the return was not prepared correctly 

[tagteam]

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@Mike9241 wrote:

the unrecaptured 1250 gain should be on line 9c of the k-1 if it's not perhaps the return was not prepared correctly 

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Your post really gives rise to the question as to whether @romakulus1 has even received a K-1 yet.

[Rick19744 · Accepted solution]

I am going to assume that the answer to @tagteam response is "yes".

Additionally, I am going to assume that the partnership provided you with your portion of the unrecaptured section 1250 property; which is what you are attempting to enter into TT; footnote on the K-1 or other method in writing.

Finally, I am going to assume that you have computed your overall gain on the sale of your partnership interest.

If all of the above is correct, you need to enter your share of the unrecaptured section 1250 property on the Schedule D worksheet line 10.

In rereading your question, it appears that this is an override based on your facts. 

If that is the case, then when you are entering the information for your final K-1, you need to indicate that this is a final K-1.  At that point, TT will ask you questions regarding your selling price, tax basis and at this point I am sure that there is a question related to unrecaptured section 1250 and you would enter that information there.

TT should handle the rest.

Line 9c as noted in a response is for unrecaptured section 1250 when the partnership sells a 1250 asset.

Your unrecaptured section 1250 is the result of your sale of your interest and this is your share.  Essentially what this does is taxes the gain at a 25% tax rate.

[romakulus1]

Thank you all (@tagteam, @Mike9241, @Rick19744)  for the fast replies!

@tagteam, I did not receive a final K-1 from the LLC yet, so good catch.

@Rick19744, I probably posted my question prematurely as the partnership has not provided me that information yet. As the date I sold my interest in the partnership, the partnership hadn't sold its assets, so I calculated my capital gain and unrecaptured section 1250 gain per the IRS look-through rules. Once I receive the final K-1, I'll do what you've indicated. With your response, I feel much better about being able to do this correctly in TurboTax.

Some background that isn't the primary focus of this post. Now that I'm no longer a member of the LLC, I don't have input into how the taxes are being done. In the past, I've caught some errors before the final returns have been submitted, so I went ahead and calculated my capital gain and unrecaptured section 1250 gain. Since I don't plan on receiving the K-1 until the last minute, I wanted to go ahead and see where all of the information will go, but I didn't consider that the data entered into TurboTax from the K-1 and additional statement from the partnership will/should have all of that information.

Thanks again!

[Rick19744]

Excellent.

However, keep in mind that a significant number of final K-1's don't provide your share of either the hot asset information or Section 1250 information.

You may need to ask for this.  I would let them know up front, if you have contact details, that you will be wanting this information.

[romakulus]

Thank you all again for the help. My new username is romakulus and my previous one was romakulus1. I have an update on the situation.

The LLC filed an extension and is finishing up the 2022 taxes. I contacted the CPA doing the taxes (different person from who did previous years) and let them know I would want the Section 1250 gain, etc. information. Well, I got my K-1 and the only Part III box with any amount in it is Box 2 (rental real estate income/loss). I called the CPA and asked about it. He said the partnership didn't have any hot assets, so I don't need to mess section 1250 capital gains, Form 4797, etc. He also said the partnership doesn't need to file Form 8038 even though I thought it would, so I provided him the information needed to file it. He said that for my personal tax return, I just need to calculate my basis in the property, subtract that from the amount I sold my share of the partnership for, and report that as a long-term capital gain on Schedule D.
I listened to his explanation then reiterated points about me having depreciation recapture, but he said I would not. The partnership owns/owned a small apartment building, which was depreciated over several years. I'm concerned about what he is telling me since it doesn't seem to follow what I've read about capital gains look-through rules, etc. He's a CPA and I'm not, so I would assume he knows what he's talking about, but it doesn't feel right. Thoughts?