FInal K-1 questions

Forum|Forum|1 year ago
March 4, 2025
2 replies
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It seems that TT has changed the way it handles final K-1s. In the past, it would ask if this was a "final K-1" and I would answer yes, and that seemed to be it. Now, I enter "This partnership ended in 2024" to state that it is a final K-1. And that forces me to answer a lot of new questions.

Background: This K-1 is received because we have invested $ in a real estate LLC. They purchased land in 2018, and many people (including us) invested $ for them to purchase it. We are a limited, domestic partner. Now, in 2024, they have sold off all the land, and we have received a final check (which is our portion of the sale) which is why we are getting the final K-1.

The K-1 Footnotes states: this entity is a passive entity, the partnership is NOT subject to the section 163(J) interest expense limitation, income is NOT considered qualified business income, the ending capital account balance represents partner's final cumulative share of partner contributions/distributions plus allocated partnership income/loss through final operations.

In TT, after entering "This partnership ended in 2024", it asks to choose how you disposed of this partnership. I chose "complete disposition" (I assume because we sold all of the property)

Next, it asks "What type of disposition was this?"

Do I choose "Sold Partnership Interest" or "Liquidated Partnership Interest"? (I assume latter, since all of property was sold?)

Next it asks for purchase and sale date for your interest: Do I just put the date they received our check for purchase, and the date we received our final check from the sale as the sale date?

This next part is the hardest part. TT than asks for information on the "Regular Gain or Loss". I need to fill in: Sale Price, Selling Expense, Partnership Basis, Ordinary Gain, 1250 Gain - Where do I find this info?

It also asks for AMT Gain or Loss info -- can I leave this blank since box 17 of the K-1 has nothing in it?

I'd appreciate any help/advice! Thank you!

Ask the Experts - Hiscox - Mar 2025

RobertB4444

Level 15

1. Liquidated Partnership Interest

2. Yes, those dates will work fine.

3. Sale price is the amount you received. Your basis should appear in the left hand column of the K-1 showing your basis at the beginning of the year and the transactions that occurred during the year to increase or decrease your basis. Selling expense was zero, and you enter the gain as the type of income that is reported to you on the K-1. Enter the exact same gain in the AMT space as the regular.

@mellynlee

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mellynleeAuthor

Level 6

Thank you for your response!

A few other questions:

You said "Sale Price is the amount you received". This amount is also listed in Box 19A, so I assume I use this number? (It is also the amount of the final check I received on 12/2024).

I'm still not sure how to fill out the Partnership Basis:

On Part II, section L, the following is shown:

- Beginning capital account

- current year net loss

- withdrawals and distributions

- Ending capital account

Do I list the Beginning capital account amount as the Partnership Basis?

How do I figure out the Ordinary Gain or 1250 Gain? My K-1 does not mention anything about 1250 gain, so can I assume I don't have this?

The K-1 Footnotes lists an amount for Interest Income, and long term capital loss - which have a total net income loss. Do I use this as Ordinary Gain?

And to confirm - you said I should put the same amounts (partnership basis, ordinary gain, 1250 gain) in AMT Gain or Loss?

Thank you!

RobertB4444

Level 15

19a is cash and marketable securities. So your income may just be ordinary income. Enter it as such.

Use the beginning capital account as your basis in the partnership.

Yes, just copy the numbers into the AMT boxes.

@mellynlee

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DaveF1006

Level 15

No. You would not use interest income and long term gain as ordinary gain. These are completely different in how they are treated for tax reporting purposes. Usually any gain from the sale of investment property is treated as "investment" gain. However, in some cases, part or all of the gain may be treated as "ordinary" gain.

In your instance, the sale of the land may be a ordinary gain or a capital gain depending on the nature of the sale. Your documents you received should disclose the nature of the sale.

Ordinary gains receive slightly different tax treatment than investment gains. Review the documents you received with your Schedule K-1 for information about how much of the gain is "ordinary", if any. If there is no ordinary gain to report, then leave that section blank because you have no information to report in that section. Leave out the 1250 gain as well if it isn't disclosed in the documents.

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