Attempting to work through things of this nature on a forum such as this is difficult, vs a one on one. So bear with me.
- Are you saying that when your clients partnership invested in another partnership they acquired 10,000 units? yes
- And now the partnership redeemed 2,778 units as reflected on line 19C - we did not redeem the units, the partnership we invested in released the units. Effectively, they are diversely invested in numerous startups, and they divested from one startup and released all of the shares related to that particular startup. Our portion of those shares amounted to 2,778.
- So now you have 7,222 units in the partnership? yes, but the remaining shares are all allocated to other investments within that partnerships portfolio of investments.
- But no cash? - never got any cash, at all. It all was transacted through our GS account, and came in as shares.
Still trying to get an understanding of the facts:
- You indicate that you received the shares at a higher FMV, but your original facts indicate this was a non cash distribution. It was a non cash distribution. But we purchased at $18K (which is what the K-1, line 19C shows) and when we received the shares back, they were valued at $92K in our GS securities account.
- Who's determining the FMV? - so, while we are invested in a partnership that is not public, they take our investment, and put it into various companies. This includes one that went public. Therefore, the market determined the value of the shares that were redeemed by the partnership we are invested in.
- Typically when something like this occurs, there is cash involved
- There's no benefit in saying the FMV has increased unless there is some type of transaction that validates the FMV. Understood - this would be within our GS securities account. However, since the shares were transferred to partnership, in non cash, just as shares, I do not believe there is any taxable event in terms of gains here.
- You indicate the original K-1 was for 2020. What was done with the K-1 for 2020?
- How was that reflected on your client's 2020 form 1065? It shows as distribution receivable - Schedule L - Other Current Assets
- Do you have an account titled "investment" on the balance sheet of your client? we have MANY investments on the balance sheet. This is one of many. Please keep in mind, i am stepping in a little after the fact here. The CPA's took the K-1 and just put the cost of $18K as a receivable under our bank account, which means, in our QB file it shows as cash, which is so odd to me.... as it in fact was never and will never be cash.
- I've handled a significant number of Private Equity Funds, so it's not like this is an area that I have not dealt with in the past.
