K-1 PTP converted to a corporation

[TomB8]

CODI, Compass Diversified, converted from a PTP to a corporation on 9/1/2021. I did not sell the units (as a PTP) or the shares after the conversion in 2021. I'm not sure how to enter the disposition/disposal. The transaction schedule shows the final disposion on 9/1/2021 as "DZ" "Exchange". The TT options are:

* Complete disposition

* Disposition was not via a sale

* Sold and am receiving payments 

I thought it should be "Disposition was not via a sale", since they converted to shares and exchanged the partnership units for shares. But the next screen asks to enter the Purchase Date and Sale Date. And I did not sell the shares in 2021, so I don't know how to enter this K-1.

Thanks,

Tom

[nexchap]

When a PTP converts to a C-Corp you effectively have to treat it as a "Complete Disposition" via a sale, and then a repurchase.  Treating it as a sale allows you to claim any suspended losses and to handle any tax liability you have for the PTP. 

To do this, though, you have to come up with the share price you're to use for your new C-Corp shares.  That should be in the communication you get from the PTP.  That sales price is basically what you'd use to close out the PTP, and to establish what your opening basis is for the new holding.

[TomB8]

Thanks - they did give me the "carryover basis", so I'll use that for my opening basis for the shares. 

This approach makes sense, thanks again.

[Mike9241]

section 1031 no longer applies to these types of transactions making them fully taxable as if it was a sale. Codi in the final K-1 package should have provided forms that allow you to compute capital gains and any ordinary income resulting from transaction.   sales price would have been based on the FMV of what you got in the exchange and probably shows up on form 1099-B

if you didn't get the k-1 package then you could have taken it upon yourself to search the company's website to get the info

here are the links

https://www.taxpackagesupport.com/compassdiversified 

https://ir.compassdiversified.com/Tax-Information/2021-Tax-Reporting-Information/