Originally I read that if our HO was inside the living areas of the house, and the sale was less than $250,000, I didn't need to report the sale. Later I read the sale did need to be reported because allowable depreciation of the HO created taxable UnRecaptured Gain. If that is true, HO sales always needs to be reported and I need to Amend my 1065 with the sale info on our HO Asset of 21% of our house sale figures. Plus I now owe taxes & penalties, when I was expecting a refund due to the business expenses from the move to relocate our business across country.
FACTS:
In 2019 my husband & I moved our 1065 LLC partnership (50/50) and home office (21%) from our 10yr location in NE to TX in order to generate a greater customer base. Since we couldn't keep our service company name (due to another company using it) and were forced to recreate our LLC, we chose to redo it with my husband a single member/sole proprietorship.
1. Sale of home resulted in UnRecaptured 1250 gain from 10yrs HO depreciation tax deductions.
2. November 2019: Proceeds from sale (plus money from personal loan) were applied to purchase of another home, which includes our HO (home office).
3. Nov & Dec 2019: Rented a bedroom and HO space.
4. Jan 2020: Moved into new home, operating HO from new home.
QUESTIONS:
1. Since we moved the HO from NE to TX with the HO continually operating, is there any way to avoid the 1250 UnRecaptured gains on the K-1 from selling the house to move our business?
2. Is the LLC partnership disposed of completely due to a "sale" or "other"...since it's really the same business. In the 1065 I listed all our assets which are fully depreciated as being "disposed-gifted" for $0 on the house sale date, and entered them as assets of the created single-member LLC fully depreciated with the original purchase date, basically transferring them from the old LLC to the new.
3. Does any of the 1250 UnRecaptured Gain from K-1 come from the disposition of interest in the partnership by myself (no longer a member of the LLC) or from my husband (new LLC single member/sole proprietor)?
4. Since the K-1 contains all the HO sale information from entries in TT Business for the 1065 return, when I re-enter the information in TT Deluxe, does it know not to charge me again regarding the UnRecaptured Gain? I realize I must make the entries due to the HO to determine if I need pay on profit from sale of the home, but want to make sure that's all it's doing.
5. I need to Amend my 1065 with all the house sale figures. Originally I read that if the HO was inside the living areas of the house, and the sale was less than $250,000, I didn't need to report the sale, but that was only regarding profit. But then I saw the reporting rules were different due to UnRecaptured Gain/Loss from HO depreciation taken in previous years. Now I owe taxes instead of getting a refund....but it would be worse if I hadn't found out now to correct it.
