K-1 does not reflect correct gain

Forum|Forum|2 years ago
August 29, 2023
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Hi - I received a Final K-1 for an investment. Please see the snip below showing the capital account. The K-1 also shows income of $164, which you would expect. However, I did not buy the investment at $1000 but I bought it from an original investor in a secondary market. at a price of $1050. As such, my profit was $114 and not $164. The investment company only ever received $1000 for the investment at issuance and just transferred ownership to my name when I bought the investment in the secondary market for $1050 (and paid $1050 to the original investor).

My question then is how to I go about reporting the additional $50 in basis and $50 less in income that is not reflected on the Final K-1? Thanks!

Best answer by Mike9241

this is a situation of inside and outside tax basis. the k-1 (inside tax basis) is correct and should be reported exactly as shown, your outsise tax basis is likely as follows

1050 +164 -1164 = 50 which you report as a $50 capital loss on disposal.

Mike9241

Answer

Level 15

this is a situation of inside and outside tax basis. the k-1 (inside tax basis) is correct and should be reported exactly as shown, your outsise tax basis is likely as follows

1050 +164 -1164 = 50 which you report as a $50 capital loss on disposal.