Positive ending capital account and final K-1 box 1 not matching distribution in 19A

[k1taxes24]

Hi,

I received a K-1 marked as final and amended and see below numbers. I am little lost on calculating below section since the K-1 is marked as final.

Sale price -- not in the K-1

Sale Expense -- not in the K-1

Partnership Basis -- no supporting document in the K-1 to calculate this as well

Ordinary Gain -- not sure what to enter here

1250 gain -- I see this number as 3735 in Box 9c

Other amounts in the K-1:

Box 1: 8945 - but my distribution including the initial investment is nowhere close to this(initial investment was 2000)

Box 5 interest income: 104

Box 9c: 3735

Box 10: 11078

Box 19 A: 5490

Box 20 A: 104

Box 20 N: 54

Box L numbers:

Opening capital account: -7250

Current year net income(loss): 20321

Withdrawals and distributions: 5490

Ending capital account: 7579

I selected 'This partnership ended in 2023' and 'received amended K-1 for this partnership'

Describe partnership Disposal: Complete Disposition

What type of disposition was this: Sold partnership interest

Entered purchase and sale dates(2016 to 2023)

Can someone please help me how to enter the sale info section and anything else I need to be aware of?

Thanks

[Rick19744 · Accepted solution]

Some comments to provide assistance:

• As a partner in a partnership it is your responsibility to maintain your tax basis in the investment.
• Several years ago, the IRS required Part II box L to be maintained on a tax capital basis.  In most cases, this should approximate your tax basis; but may not exactly be the same.
• Since it appears that you have not maintained your tax basis, we will use the K-1 Part II box L as your tax basis.
• You have not indicated whether you have any suspended losses; as you also don't indicate whether you were passive or active in this partnership.  My assumption is passive.
• If you do have suspended losses, and you mark this K-1 as final in TT, if you have used TT in the past, TT will handle the suspended losses appropriately; they become freed up and will be reflected in your tax return as ordinary losses.
• You will also enter the K-1 into TT just as you would any other year.
• When TT asks the details on the disposition, just indicate "sold", as effectively that is what occurred.
• To determine your tax basis (based on the capital account details provided in Part II box L), you have a tax basis of: $13,071-BOY (7,250) plus current year activity $20,321 (as reflected in box L).  I get $20,127 based on the separately noted K-1 line items, but not sufficient information to account for this $194 difference.
• So now, when TT asks for your "sale" details you will enter the distribution of $5,490 as your selling price and your tax basis of $13,071 as your cost basis.  This will generate a capital loss of $7,581; which is $2 different than your ending tax capital figure reflected on the K-1.  These amounts will be reflected on form 8949 and Sch D by TT.

[k1taxes24]

@Rick19744 thank you very much for your input. This was an active partnership and I had used TT Premier as well in the past few years to enter this K-1 information. I recall seeing negative amount in the past K-1 statements, I was told that I need to pay that as recapture since the partnership is sold for profit in 2023. I understand that I had gotten some benefit in the past but the final distribution is less than taxes paid for the 2023 year. Thanks again for your help.

[Rick19744]

Follow-up comments:

• You have no recapture since there are no hot assets
• The Section 1250 recapture would have come into play if you had an overall capital gain.  Since you don't, no impact.
• In the past you may have had at-risk limitations, but not sufficient details to address this.
• Just enter as reflected in my previous reply and you will be good to go.

[k1taxes24]

got it, thanks again for the clarification. I will calculate the numbers accordingly.