How to characterize a partnership's disposition via redemption/final distribution.

[kbsanders2008]

I redeemed 100% of my interest in a partnership which was paid to me via a distribution. I also received a final K-1. The partnership didn't actually sell the underlying assets and I assume it just affected the remaining partners share percentage.

I'm trying to properly record the disposition in TurboTax.

The choices in TT are

• No entry
• Complete disposition
• Disposition was not via a sale
• Sold and am receiving payments.

I tried "Disposition was not via a sale", but then TT doesn't ask for my basis and doesn't check the boxes on Schedule E (Part II)(28)(e) for basis computation even though the instructions on the form state "Note: If you report a loss, receive a distribution, dispose of stock, or receive a loan repayment from an S corporation, you must check the box in column (e) on line 28 and attach the required basis computation.".

The distribution amount I received is on the final K-1 in box 19 with code A and I recorded that in TurboTax.

Any thoughts on the correct way to characterize a disposition via 100% redemption in TurboTax?

[Mike9241 · Accepted solution]

i assume this was a private partnership  - not one in which you acquired a share through your broker.

make sure final k-1 is checked in TT

enter the k-1

then answer yes to sale. you did sell your interest for whatever the distribution was. 

you'll be taken to a section where you must enter the disposition (sales) info.

sales price = distribution

next, you need to enter your tax basis before the distribution

finally, if there is a schedule or additional statement reporting ordinary gain (section 751 or report on 4797 line 10)  that must be entered. 

you're done.

the sale will result in a capital gain or loss and maybe some ordinary gain if that's reported to you on a separate statement.