Distribution on K-1

[shroffa1]

Hi Dave,

  This is form 1065.

   Code in Box 19 is "A".

Thanks.

[DaveF1006]

Reporting these in Box 19 is not a taxable event if you were awarded shares. It is a taxable event however because you sold these and the sale needs to be reported elsewhere in your return.

1. Go to federal>wages and income>investment income>stocks, bonds, other
2. Now you will answer some preliminary questions.  Say no if you did not receive a 1099B.
3.  Next screen is critical because it asks you for the sale price, description, what you originally paid for it, date sold, date acquired etc.
4. Now you will be asked a question if this was a sale of employee stock, here you will say yes.
5. The next screen will ask what type of employee stock is it.  Without knowing the specific details of this award, if you are uncertain, just check none of these.
6. if you know the type of employee stock it is, you may wish to choose the other options because you may receive more favorable tax treatment.  
7. Remember, use as the basis the market price you paid for the stock.

[shroffa1]

Thanks again.

In my case, I got a B series stock options when I joined a company in 2016 with 5 year vesting period. My company was acquired by another PE firm in 2019. On the day of closing (12/02/19), my B series options got converted to class A units.

In 2020 April, I lost my job and they repurchased the stock and I got the distribution in September. I was given a K-1 (form 1065) and box 19 showed the distribution with code A.  Do I report this as a short-term or a long-term capital gain?

Thanks.

[DaveF1006]

According to this link, you meet the holding period requirement if you don't sell the stock until the end of the later of:

• The 1-year period after the stock was transferred to you, or
• The 2-year period after the option was granted.

Since the stock got converted to Class A on 12/02/2019 and then sold in April 2020, I would treat this as short term. It does say in the link however that you should have received a 3922 from your employer when the employer has recorded the first transfer of legal title of stock you acquired pursuant to your exercise of the option. This may determine the Holding period that may be favorable to you.

[jfoley0628]

I received a K-1(1065) from a partnership from B shares that were sold when my company was sold. The K-1 has Box 9a long term capital gain and box 19 distibutions with the income received from the B shares. I worked for the same company from Jan 2021 through May 2021 when the company was sold. The company was based in California. I lived in California for the first 2 months of 2021, through end of Feb, then moved to my home that I own in Arizona in March and continued to work for my company until it was sold in May, when I left. My question is how do I file my State Tax forms for both California and Arizona?

[MarilynG]

You will file a Part-Year Resident return for both California and Arizona.

If you received the Capital Gains while residing in Arizona (after the company was sold), all the Capital Gains is taxable income to report there. 

Click this link for more info on How to Allocate Income for a Part Year Resident and more details on How to File a Part Year Resident Return. 

[isaacg]

Hi there, I worked for an LLC and got Private Stock options beginning in 2007, received some more in 2012 and stopped working there in 2014 but just kept it. Every year I have been filing a K1 which usually doesn't land me with any tax liability as the distributions were far and few between. This past year in 2021 they sold a portion of the company and all Stock members received very large distributions, including me. Box 9a on form 1065 shows my long term capital gain being a high amount reflecting the distribution, while 19a and 19c show my actual distributions. I am being taxed heavily on this(around 18 percent it looks like), which I'm glad I didn't go on a huge spending spree! Does this sound correct that this distribution due to sale of company is taxable? I did file an 83b election back in 2007 with IRS.

[GeorgeM777]

Yes, given that long-term capital gain rates are 0%, 15%, or 20% for most taxpayers.  Making the 83b election is most advantageous when the amount of income reported at grant is small, the stock's growth prospects are moderate to strong, and the risk of stock forfeiture is very low.  

To better understand your tax liability, you might want to see what your tax liability would be had you not filed your 83b election.  Given the current capital gain, it would likely be much higher.  

@isaacg