topic Final K-1( Form 1065) disposition in Get your taxes done using TurboTax

Final K-1( Form 1065) disposition

BJ9 — Fri, 12 Mar 2021 15:59:44 GMT

I invested in a real estate limited partnership (not a PTP). The partnership was basically a group of individual investors that created a fund that bought and sold property (land), housing developments and rental income. The partnership sold all of the properties in the fund and is ending the partnership fund. This partnership fund will now no longer exist. In TurboTax I can check one of four boxes; No entry, Complete Disposition, Disposition not via a sale, Sold and receives payments. Which box should be checked?

Re: Final K-1( Form 1065) disposition

Anonymous_ — Fri, 12 Mar 2021 16:16:11 GMT

If you select any option other than No entry or Disposition not via a sale, you will be prompted to enter a sales price (which is apparently inapplicable).

Re: Final K-1( Form 1065) disposition

gustj012 — Fri, 02 Apr 2021 20:35:18 GMT

I have a similar situation (received a final K-1 1065 from a partnership), which reports final earnings/expenses from 2020 tax year. In 2020 the partnership management sold off all remaining assets, effectively liquidating the business, and this K-1 reflects the final reporting of gains and losses attributable to partners based on their relative ownership %. There was no independent sale by me as a partner to sell to sell my portion of the partnership to a third party, therefore no sale date/sales price to report. Therefore initially I agree that in the TT program I need to fill the radio button for No Entry. (the option for Disposition not via sale triggers a screen to enter purchase date & sale date)! However, when using the "no entry" TT does not record that the K-1 is a final K-1 (based on viewing the K-1 in forms view). And that seems incorrect. But if I manually check the " final" box in forms view, then go back to step-step, including running Smart Check....smart check then notes an error where it is looking for information about disposition as a sale, which is also incorrect. Catch-22???

Re: Final K-1( Form 1065) disposition

karinm1971 — Sun, 06 Jun 2021 14:00:16 GMT

Have you solved this? I have a similar situation.

Re: Final K-1( Form 1065) disposition

kbeckett6 — Sun, 10 Apr 2022 17:26:39 GMT

Same problem! Any resolution??

Re: Final K-1( Form 1065) disposition

kbeckett6 — Sun, 10 Apr 2022 19:07:39 GMT

I spent over an hour on this, then an hour with support. The support process was pretty terrible, and in the end gave me the same workaround I came up with on my own: Do NOT check the "Final K-1" box even though it IS a Final K-1. The IRS will get the Final K-1 from the Partnership, so you SHOULD be OK. Probably the program will then import the K-1 the following year, but you can just delete it. Probably you won't run into any problems, and your taxes owed will probably not be affected (my understanding is that the Final in some cases forces some resolution of carried over losses, etc... but probably the K-1 as prepared will be accurate). BUT, there's no question this is a horrible bug in the software. The worst thing was that despite this being an obvious and horrible BUG, it was obvious that the support person had no intention whatsoever of reporting it so that it might be fixed some day. For the 1 in 1,000 people in the future who suffer lost time and grief due to this bug: Congratulations on finding this message! It probably won't help, but at the very least you can stop searching for a solution and for God's sake don't try to report it to Intuit - you'll be stonewalled for certain, and you'll never get those precious hours of your life back.

Re: Final K-1( Form 1065) disposition

jsonp — Tue, 18 Apr 2023 19:03:34 GMT

so are you saying select No entry or Disposition not via a sale?

Not know much but just reading Complete Disposition or Sold and receives payments also make sense to me, everything is passthrough. Even though i didn't sell the property but the business sell the property is that the same?

Re: Final K-1( Form 1065) disposition

tkj99 — Tue, 18 Apr 2023 19:06:41 GMT

I would say complete disposition. This would assume no property remains and all remaining assets (cash) have been distributed to the former LLC members. The K-1's should show any gains and losses from the disposal of the investment properties.

Re: Final K-1( Form 1065) disposition

karinm1971 — Tue, 18 Apr 2023 20:10:04 GMT

Yes, if the partnership sold the property that is considered you selling your property for tax purposes.

Karin

Re: Final K-1( Form 1065) disposition

karinm1971 — Tue, 18 Apr 2023 20:14:17 GMT

I would just add that, although yes the final K-1 will show gain/losses from disposal of the investment, you still need to figure your actual gain/loss yourself by subtracting the adjusted basis (that you've been tracking year by year) from the sale proceeds.

The partnership people who issue the K-1 won't know what your adjusted basis is (necessarily), which is what determines your tax liability from the sale.

Karin

Re: Final K-1( Form 1065) disposition

jsonp — Tue, 18 Apr 2023 21:36:47 GMT

problem with select Complete Disposition is how do you know ?

- start date (or purchase date)

- end date ( date sold property)

- purchase price (assuming that the price you invest in initially

- sold price

hope someone with experience doing this can answer

Re: Final K-1( Form 1065) disposition

karinm1971 — Tue, 18 Apr 2023 21:55:59 GMT

The start date is the date you invested, and end date is the date the partnership sold the investment. Purchase price, yes, your investment amount. The sale price I believe is the amount for "withdrawals and distributions," in a panel on the left side of the K-1, which is what brings your ending capital account to zero.

Note that I am not a tax expert and am just someone who's been doing their spouse's taxes for several years, and he has/had several of these partnerships over that time.

Karin

Re: Final K-1( Form 1065) disposition

AliciaP1 — Tue, 18 Apr 2023 23:15:42 GMT

It depends on what you are actually trying to dispose of and what form you are reporting. If a partnership sold a property and you are filing the Form 1065, you need to enter the sale details. If the partnership sold a property and you are a partner, simply enter the information from your Schedule K-1 you received. If you sold your partnership interest in the partnership, you will enter the details from your transaction to sell the ownership.

@jsonp

Re: Final K-1( Form 1065) disposition

jsonp — Wed, 19 Apr 2023 18:29:05 GMT

@karinm1971 This is helpful.

Re: Final K-1( Form 1065) disposition

mazink — Tue, 12 Sep 2023 19:40:30 GMT

@AliciaP1

If you select "No Entry" the K-1 is not marked as Final, which is incorrect. TT when it sees the Final K-1 marked, it allows Passive loss which were disallowed in previous years to be taken, which is correct, but TT asks for sale date/price and purchase price/data, and this is not correct. If you do not mark final K-1, next year you will have to delete the imported K-1, and this will also delete any carryover passive loss which were disallowed in previous year, which is incorrect.

If you mark disposition not VIA sale, you are not asked for sale/purchase price, but TT create a K1P additional Info. , and in Part II (disposition of Partnership Interest" checks box 1b , i.e. "gifted partnership", which is incorrect.

If you mark complete disposition, and mark it as liquidated partnership, it ask for Sale information, and based on this creates an entry in schedule D, which is incorrect. In this case it also allow disallowed passive losses which were carried forward.

I discussed this with a CPA, and they told me that one should mark FINAL K-1, and complete disposition, and the answer for "Tell us about your sale" should be liquidated partnership Interest. They indicated TT is not correct, and should not ask for sale date/price purchase data/price, as all distribution and losses have been taken care in the K-1.

Re: Final K-1( Form 1065) disposition

ulises78 — Thu, 21 Sep 2023 00:16:09 GMT

So what was the final solution?

I have the same case on my 2022 tax return. Someone from the forum told me to put "disposition was not via sale" and when I do that the program asks when property was purchased and with it was sold, but it doesn't ask about purchase/sale price.

I read in some other forum that doing so, could cause your gains to be taxed twice.

But I also called support and they told me to use instead complete disposition but I told them I did not have sale prices/purchase price, so we left that at 0 and the end result was pretty much the same.

So I don't know if one is more correct than the other.

Re: Final K-1( Form 1065) disposition

karinm1971 — Thu, 21 Sep 2023 02:01:49 GMT

I'm not clear why you are not using your initial investment as the purchase price and the final distribution as the sales price. It can (in my experience) feel a little weird treating one's (a limited partner's) investment and the results of the sale as one's "purchase price" and "sales price," but I believe that's the correct way to think about it.

Re: Final K-1( Form 1065) disposition

mazink — Thu, 21 Sep 2023 02:42:38 GMT

@karinm1971

You cannot use the initial price as the purchase price, if you check where it asks for "Enter Sale Information, it is asking for partnership basis, not purchase price. The partnership basis gets adjusted as there are losses/gains and distributions for the investment.

For example if you invested $5K in 2020

PB = partnership basis

In 2020 if there are no other losses/gain or distribution the PB =$5K at the end of 2020

In 2021 the investment had a loss of $1000, the PB at the end 2021 is $4000

In 2022 the investment issues a Final K-1 and a final distribution of $4000

If you use the initial cost of $5000 and enter the initial investment as the PB, and your sale price as $4000, you will end up double counting the $1K loss, once in 2021 as a passive loss (for passive activities), and a capital gain loss in 2022.

TurboTax should be able to calculate the PB as you enter the K-1 for each year, and should be able to give the option where a partnership ends but without a sale.

You can try some experiments with a dummy K-1which started in 2020, and is liquidated in 2022. Depending on what options you select in the interview questions, results will be different. Also, in 2022 make sure you mark the K-1 as FINAL, in TT, this allows any passive losses, that were not allowed in previous years to be taken when the FINAL K-1 is entered. Also, if TT recognizes that the K-1 is final, next year when you import your 2022 tax return into TT, it will know that in 2022 the partnership ended in 2022, and will not carry over any information to the 2023 tax return.

Re: Final K-1( Form 1065) disposition

sntrypilot — Tue, 10 Oct 2023 18:44:36 GMT

Hi. I really, really need some help here. I have spent no less than 40 hours trying to enter in a K-1 disposition (not kidding) and I keep getting an obviously wrong answer. Here goes:

On 7/10/2020 I invested in a limited partnership for a real estate purchase. On 9/30/2022 that real estate was sold, liquidated (complete dissolution), money disbursed to partners and company ended. This seems like it should be simple. The only capital invested was the initial $35,000. There were no distributions other than the $52,251 I received upon liquidation. All activity in 2020 and 2021 are passive. Here are the details:

- Limited Partnership

-Starting investment - $35,000

- K-1 for 2022 is the final K-1

- I select "liquidated"

- I select "complete dissolution"

- Outside basis - $34,351

- Beginning capital account current year (Part 2 L) - $34,243

- Current year net income (Part 2 L) - $18,008

- Withdrawals and distributions (Part 2 L) - $52,251

- Ending Capital account (Part 2 L) - $0

- 2022 Unrecaptured section 1250 gain (Part 3 9c) - $1,691

- 2022 Part 3, Box 2 - -$6,787

- 2022 Net section 1231 gain (Part 3, 10) - $24,761

- 2022 Distributions (Part 3, 19) - $52,251

- Did any Unrecaptured Section 1250 gain come from estates... or disposition of an interest in partnership - I select "no"

- All of my investment in the activity is at risk

- I have passive activity losses carried over from last year

- no uncommon adjustments

- I have completely deleted the K-1 and re-entered all data

- 2022 Other Information (Part 3, 20) A: $34; N: $5,217 V: $9,993

- I am able to enter in all the K-1 information

- I select "This partnership ended in 2022"

- No special handling

- The big problem is that I keep getting under Income - Business Items (as shown) a -$33,385 Schedule K-1 and a Sale of Business Property $24,761. This does not seem right. I earned $18,008 in current year net income. My displayed tax refund is like CRAZY high - more than $10,000 when before adding the K-1 it was around $7,500. So on this investment which was extremely profitable produces a tax refund of $3,000+

Again I am so, so desperate here - I am running out of time, taxes due 10/16/2023 and I haven't even done the final review or the state taxes. Please help.

Re: Final K-1( Form 1065) disposition

jsonp — Wed, 11 Oct 2023 04:31:02 GMT

look like unclear what to select in turbotax