topic Distribution on K-1 in Retirement tax questions

Distribution on K-1

scottv9876 — Wed, 05 Jun 2019 23:25:52 GMT

I received a final K-1 from a partnership that I had a Profits interest in, and where I had filed an 83(b) Election. The K-1 in the capital section starts with zero, has Additions and withdrawals that net to zero. There is also a distribution to me of the same amount that should be LTCG. There is no income or loss. When I enter the distribution in TT it does not increase my income anywhere. How do I get this in as a LTCG?

What box is it reported in?

AmandaR1 — Wed, 05 Jun 2019 23:25:54 GMT

What box is it reported in?

19 Distribution Code A

scottv9876 — Wed, 05 Jun 2019 23:25:55 GMT

19 Distribution Code A

Thank you for your answer - it helps - it's LTCG due to 8...

scottv9876 — Wed, 05 Jun 2019 23:25:56 GMT

Thank you for your answer - it helps - it's LTCG due to 83(b) election

Your welcome. You might discuss it with whomever filed t...

AmandaR1 — Wed, 05 Jun 2019 23:25:57 GMT

Your welcome. You might discuss it with whomever filed the partnership K-1, since you're running them through the partnership.

The distribution is long term capital gain by the amount...

AmandaR1 — Wed, 05 Jun 2019 23:25:59 GMT

The distribution is long term capital gain by the amount that exceeds your partnership basis. Therefore, only the amount of box 19 A that is greater than your adjusted basis in the partnership will be taxed.

It sounds like your capital basis is showing you there was no excess gain. Any excess long term capital gain should be reported in the capital gain boxes (or ordinary income/other as applicable), which it sounds like yours are empty (often box 8-10). See the Schedule K-1 (1065) instructions for box 19:

If the amount shown as code A exceeds the adjusted basis of your partnership interest immediately before the distribution, the excess is treated as gain from the sale or exchange of your partnership interest. Generally, this gain is treated as gain from the sale of a capital asset and should be reported on Form 8949 and the Schedule D for your return. However, if you receive cash or property in exchange for any part of a partnership interest, the amount of the distribution attributable to your share of the partnership's unrealized receivable or inventory items results in ordinary income (see Regulations section 1.751-1(a) and Sale or Exchange of Partnership Interest, earlier). For details, see Pub. 541.

Read more at the instructions (page 13):https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf

Let me know if you have any follow up questions.

Re: The distribution is long term capital gain by the amount...

bbutz22901 — Sat, 30 Nov 2019 00:07:10 GMT

I have a K-1 with Boston Capital for low income housing. I originally invested $40,000. I got approx $37,500 in tax credits. I have discovered that I have not taken approx $10,225 of that amount. According to Boston Capital, I am able to carry that credit forward for up to 20 years from origination date, which was 2006. My 2018 tax credit allowed without any carry forward was only $6. So, I took a big hit to my tax liability. Given that I have
approx $10,225 in carry forward credits, where do I report a portion of that to amend my 2018 return to receive a refund of the $1775 I paid in 2018 taxes that I should not have had to pay. Please be specific with the form and line# and check-box I need to do to enter a portion of that $10,225 to receive an amended $1775 of those taxes. Thank you. Please reply asap.

Re: Distribution on K-1

CatinaT1 — Thu, 27 Feb 2020 21:22:55 GMT

Did you have a specific question?

Re: The distribution is long term capital gain by the amount...

rohiz — Fri, 10 Jul 2020 03:52:49 GMT

Hi, I'm in a similar situation - I have a form K-1 that reports a cash distribution I received from my private employer for which I have equity (stock options). I was advised to report it as a sale of stock in the Investment Income section as my tax basis is $0. But now I'm being asked how I originally acquired the stock and none of the options (bought, inherited, gift, divorce, short sale, etc. ) apply. There is an option for receiving stock as a result of other corporate activity but then TurboTax won't let me proceed until I select how I originally received the stock! What to do? Thanks for your help!

Re: The distribution is long term capital gain by the amount...

DavidS127 — Fri, 10 Jul 2020 19:41:15 GMT

From your other posts in Community, it appears that you aren't really trying to report the sale of stock, but instead you are trying to report a distribution as a capital gain because that treatment was mentioned in the supplemental information on the K-1 your received. But, you also said the K-1 you got is a Form 1065 K-1, which is a K-1 for a partnership, not a corporation.

More information may help resolve your issue. For example, can you clarify how you obtained stock options for a partnership share, what was given up in exchange for those "options", and what has been reported on your K-1 in previous years?

Re: The distribution is long term capital gain by the amount...

rohiz — Sat, 11 Jul 2020 15:49:14 GMT

Hi David, thank you so much for your reply. Yes, I need to report a capital gain on a distribution from my husband's employer (LLC, a previous startup) where my tax basis is $0. My husband was granted those stock options as part of his employment letter in 2015. We received a K-1 in 2015 which was essentially blank in terms of financial data and then not again until TY2019 for the distribution. In the Partner Footnotes that supplements the K-1, it explicitly states that the tax basis is $0 so I'm certain that the entire distribution is taxable (as a capital gain).

I had actually started filling out the Forms directly instead of Step-by-Step (an epiphany I had after I finished my barrage of posts to the Community!) and I think had it figured out but your guidance about selecting "Everything else" (instead of Stock) was EXACTLY what I was looking for! I was so focused on accounting for it as a sale of stock (per the "Learn More" instructions in Turbo Tax) that I failed to see it. THANK YOU very much for your help and guidance!!

Re: The distribution is long term capital gain by the amount...

svnguyen99 — Tue, 14 Jul 2020 14:02:00 GMT

Hi @DavidS127,

What you said about the Form 1065 K-1 being just a distribution from a partnership is my wife's situation.

-She was granted an interest in the partnership so her tax basis is 0.

-Her Form 1065 K-1 shows a distribution in Box 19 Code A only.

-I think I finally manage to get TurboTax to treat it as capital gains by selecting "Stocks, Mutual Funds, Bonds, Other" -> Other and reporting as a Investment Sales with 0 basis. I had to play around with the acquired date so that it was more than 1 year before the actual distribution date to have TurboTax treat it as long term capital gains.

I've been researching this for over a day now and this what most TurboTax experts recommend on how to report this K-1 distribution. Is playing around with the acquired date the right thing to do in TurboBox or is there a better way?

Re: The distribution is long term capital gain by the amount...

DavidS127 — Tue, 14 Jul 2020 16:13:32 GMT

The IRS guidance in IRS Publication 541 at this link is that the distribution in excess of the adjusted basis is capital gain. It would be long term capital gain if it occurs more than one year after the date the partnership interest was granted. In other words, the "sale date" is the date of distribution and the "acquired date" is the date the partnership interest was acquired.

@svnguyen99

Re: The distribution is long term capital gain by the amount...

shroffa1 — Mon, 03 May 2021 20:26:21 GMT

Hello,

I was awarded stock options (B series)when I joined the company in 2016. When I left the company in 2020,

my shares were sold and appeared as a distribution on 2020 K-1 Box 19A.

When I entered this information in Turbo Tax under form K-1, there was no change to my taxes. Is that correct?

Box 8, 9 and 10 are blank on form k-1. In Box N, beginning balance shows the distribution gain and ending

balance is 0.

Thanks for your help.

Re: The distribution is long term capital gain by the amount...

DaveF1006 — Wed, 05 May 2021 21:35:09 GMT

Is this K1 from a S-Corp or partnership (1120Sor 1065)? Also what was the distribution code for Box 19?

Re: The distribution is long term capital gain by the amount...

shroffa1 — Thu, 06 May 2021 01:18:17 GMT

Hi Dave,

This is form 1065.

Code in Box 19 is "A".

Thanks.

Re: The distribution is long term capital gain by the amount...

DaveF1006 — Thu, 06 May 2021 03:53:04 GMT

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.

Go to federal>wages and income>investment income>stocks, bonds, other
Now you will answer some preliminary questions. Say no if you did not receive a 1099B.
Next screen is critical because it asks you for the sale price, description, what you originally paid for it, date sold, date acquired etc.
Now you will be asked a question if this was a sale of employee stock, here you will say yes.
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.
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.
Remember, use as the basis the market price you paid for the stock.

Re: The distribution is long term capital gain by the amount...

shroffa1 — Thu, 06 May 2021 21:42:33 GMT

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.

Re: The distribution is long term capital gain by the amount...

DaveF1006 — Thu, 06 May 2021 22:03:07 GMT

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.

Re: The distribution is long term capital gain by the amount...

jfoley0628 — Thu, 31 Mar 2022 19:08:36 GMT

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?