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posted Jun 4, 2019 7:00:57 PM

K1 distribution taxable?

My husband was in a partnership with some friends where they each paid a monthly amount and invested in the stock market. He passed away and a few months later I withdrew the money. On the K1 there is nothing in any of the boxes in Part III, only Parts I and II.  I inherited the partnership as the beneficiary but I am still the surviving spouse. Is the distribution taxable?  Also, when I got the K1 form, it’s in his name not mine.  Will this cause any issues?

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1 Best answer
Level 13
Jun 4, 2019 7:01:00 PM

I will provide some guidance here:

  1. Having the K-1 in your husbands name should not cause an issue.  It appears based on your facts that he died in 2017 and you are able to file a joint return in the year of death.
  2. As a partner in a partnership you need to be maintaining a basis schedule of your investment in the partnership.  
  3. The distribution will be taxable to the extent that the proceeds exceed the basis in the partnership.  As such, the key here is to know what your basis is.
  4. Depending on when the $$ were distributed to you, it could be accurate that nothing is reported in Part III.  I assume that the K-1 is marked final.
  5. The other issue is the K-1 may need to be reported in your husbands estate.  You may be below the filing threshold.  Without knowing all the facts here, I would recommend you consult with a tax professional for some advice on how to report this for 2017.

1 Replies
Level 13
Jun 4, 2019 7:01:00 PM

I will provide some guidance here:

  1. Having the K-1 in your husbands name should not cause an issue.  It appears based on your facts that he died in 2017 and you are able to file a joint return in the year of death.
  2. As a partner in a partnership you need to be maintaining a basis schedule of your investment in the partnership.  
  3. The distribution will be taxable to the extent that the proceeds exceed the basis in the partnership.  As such, the key here is to know what your basis is.
  4. Depending on when the $$ were distributed to you, it could be accurate that nothing is reported in Part III.  I assume that the K-1 is marked final.
  5. The other issue is the K-1 may need to be reported in your husbands estate.  You may be below the filing threshold.  Without knowing all the facts here, I would recommend you consult with a tax professional for some advice on how to report this for 2017.