Final K-1 Question

[mellynlee]

I'm sorry...I seem to be replying to your earlier posts, and then I saw your later posts.

To summarize:

The Purchase Date is the date they received my check and confirmed (2/16/2018)

The Sale Date is not listed anywhere on the Final K-1 (there is no date listed). I have the stub of final check sent to me, along with a dated memo stating the final sale occurred. The date is 12/17/2021, so I will make this the Sale Date.

I'm not sure what you are referring to when you mention to enter ZERO for cost basis and sales price. TT does not ask me for this information here.

On the next page, TurboTax asks for the following: Selling Expense, Partnership Basis, Ordinary Gain, 1250 Gain

I have no idea what to put there.

I would love to use TTLive, but I purchased TurboTax Desktop, and I thought you could only use TTLive if you purchased the online version?

[Irish22_CPA]

In the Sale of Investment Section enter Sales price to equal the amount of the check you received from the LP upon dissolution.

For purchase price enter the adjusted partnership basis. That calculation is: Purchase price + additional contributed capital + profit for each year  LESS distributions + losses for each year.

[mellynlee]

Sorry, I replied to an earlier post, and just saw your other posts.

To answer your question about gains/losses flow through from K-1 to LP...I'm not exactly sure what you mean. If you mean, did I receive any other checks from this LP, the answer is NO. This is the only check I have received (in 2021), and I don't believe we had any gains or losses in the previous years since we were waiting for the land to sell.

[mellynlee]

Hi,

I see all of your additional posts. I am NOT on TT Online, I have TT Desktop - does that matter?

Also, I'm SO sorry, but I have to leave for an appointment now, but will be back in 1 1/2 to 2 hours...will I be able to contact you again?

Thank you so much!

[Irish22_CPA]

I'm sorry I will be off shift then. I can recheck tomorrow. The steps in Desktop will be very similar. Give it a try and let me know. Or you can call in - we do offer live advice for desktop, but they will ask for an upgraded charge from you. The important thing is to leave the gain amount blank in the K-1 section. And record it in the Investment area. Unless you can determine the gain/loss amount based on the basis calculations steps I provided you. That would work also. Ignore the AMT area. If you are high income, just enter the same amount.

[Irish22_CPA]

Try the steps in this link to enter the sale in Desktop. The LP can be classified as Land or an Investment - either will work.

[mellynlee]

I upgraded my TT from Deluxe to Premier.

I left everything blank in the K-1 section (from my original question). I selected "Complete Disposition", but then left the Sales Date and Purchase Date blank, as well as EVERYTHING on the following page regarding 'Regular Gain/Loss' and 'AMT Gain/Loss'.

Should I have filled out any of that information?

I then followed your directions to go to the Wages/Income section, and entered a new investment, saying "I'll enter one sale at a time".

The following items appeared, and I answered as shown:

Description: Land Sale

Date Sold:  12/17/2021  (This is the date of the check we received with final payment)

Date Acquired:  2/16/2018 (This is the date our check was received and accepted, according to a letter)

Sale proceeds:  Do I put the amount of the check that we received on 12/17/2021?

Cost or other basis: Do I put the amount of the check we sent in on 2/16/2018? We did not send any additional $, nor did we receive any other $ except for this final check on 12/17/2021.

Holding period: Long Term (Box F)

Thank you!

[Mike9241]

Description: Land Sale

Date Sold:  12/17/2021  (This is the date of the check we received with final payment)

Date Acquired:  2/16/2018 (This is the date our check was received and accepted, according to a letter)

Sale proceeds:  Do I put the amount of the check that we received on 12/17/2021?

Cost or other basis: Do I put the amount of the check we sent in on 2/16/2018? We did not send any additional $, nor did we receive any other $ except for this final check on 12/17/2021.

Holding period: Long Term (Box F)

yes to everything except cost. with a partnership, your tax basis (cost) changes with its activity which affects the partner's interest.

you start with what you paid in 2018 then from each year's k-1 you need to add all items of income and subtract all items of expense or loss if these are zero then it's what you paid in 2018. 

[mellynlee]

OK thanks. 

Regarding Cost, I looked through the K-1's from 2018-2020. None of them list any Ordinary business income (loss) - Part III #1.

However, there is a section L under Part II (Information About the Partner) that lists the 'Partner's capital account analysis'.

On each of the K-1's, there is an amount for 'Current year increase', and it shows an amount for 'Ending capital account'. It also selects "Tax basis". Each year, the 'Ending capital account' has increased by a small amount - usually equal to a number in the K-1 under 'Interest Income'.

The final 'Ending Capital account' number on the 2020 K-1 is slightly higher than the amount of our original check.

Is that the number that I should put into the "Cost or other basis"?

[Mike9241]

yes income that adds to basis/cost would include the following (2021) k-1 lines in part III.  1 thru 3, 4c, 5, 6a, 7,8,9a,9b, 10 and 11

less lines 12, 13, 15 and 18.  these lines vary from year to year because the IRS revises the form 

you can take the ending capital amount from 2020 and then from section L in 2021 add the current year's net income and other increases or subtract if other (decreases). in theory that should leave withdrawals and distributions equal to the final check you got and your ending capital will be zero.  if withdrawals and distributions amount are more than the final check then it's likely you got other payouts during the year. The other payouts, if any, would also reduce your basis/cost 

put another way your basis should equal the final distribution amount because you start with what you put in add the net income each year (or subtract the net loss)  and subtract all distributions other than the final one.   

[mellynlee]

OK, thank you!

Yes, they do that addition for me in section L of my 2021 K-1:  so my cost basis is also listed as "Other increase/decrease" here. If you add it to the 2021 capital gain ("Current year net income"), it equals an amount *close* to my final check, but not quite. This amount is listed in section L as "Withdrawals & distributions", and my "Ending capital account" is 0.

Part III, line 19 (Distributions) lists 2 items with codes:

A (Cash and marketable securities): This is the amount of our final check

C (Other property): Another amount - when you add this number to the above number (final check amount), it equals the "Withdrawals & distributions" amount that was listed in section L. (Basically, it equals the "cost basis I had up to 2020" + "2021 capital gain amount")

So now my question is:  Do I add this other amount (listed in part III, line 19, code C) to my cost basis too?

I hope this isn't too confusing....thank you!

[Mike9241]

here is what the tax laws say

Code C. Other property. Code C shows the partnership's adjusted basis of property other than money immediately before the property was distributed to you. 
If you received the property in the liquidation of your interest, your basis in the distributed property is equal to the adjusted basis of your partnership interest reduced by any cash distributed in the same transaction

in other words before the withdrawals and distributions, you had a basis of X.  the amount shown in withdrawals and distributions consisted of property and cash and was equal to the basis before the distributions. 

so reduce your tax basis by the amount of property distribution. that should leave a basis equal to the cash you got  - so no gain/loss

you now have a basis in the other property. don't have a clue as to what it is - only the partnership can answer that unless it provided details. when that other property is sold you will have another gain or loss depending on sales price vs your basis. 

these are the complete k-1 instructions for 19C summarized above for your situation

Code C. Other property. Code C shows the partnership's adjusted basis of property other than money immediately before the property was distributed to you. In addition, the partnership should report the adjusted basis and FMV of each property distributed. Decrease the adjusted basis of your interest in the partnership by the amount of your basis in the distributed property. Your basis in the distributed property (other than in liquidation of your interest) is the smaller of:
• The partnership's adjusted basis immediately before the distribution, or
• The adjusted basis of your partnership interest reduced by any cash distributed in the same transaction.
If you received the property in liquidation of your interest, your basis in the distributed property is equal to the adjusted basis of
your partnership interest reduced by any cash distributed in the same transaction. 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, (not included)

[mellynlee]

OK, I'm not exactly sure if I follow correctly, but for example --

Let's say Section L of my 2021 K-1 shows the following:

current year net income: 500  (this is the long term capital gain listed in part III 9a of K-1)

other increase/decrease: 1200 (this is my initial investment + other gains received in 2018-2020)

withdrawals & distributions: 1700 (addition of above 2 numbers)

Ending capital account: 0

Part III line 19 (Distributions) reads:

A - 1500 (this is the final, and one and only, check that I received for this partnership, in 2021. The land is now sold.)

C - 200

So, if we use the example above, then I should say my Cost Basis is 1000? (1200 - 200 distribution).

Thank you!

[Mike9241]

based on the numbers you gve

basis

original amount put in +$1200

income +$500

total tax basis  +$1700

property distribution -$200

basis for gain or loss upon termination $+1500

so proceeds received final distribution $1500 less tax basis $1500 = zero taxable gain

you also have this other property with a $200 tax basis whatever it is

at such time as you dispose of it you will have a gain or loss measured by the difference between the sales price and its tax basis  

[mellynlee]

OK, so in using the example numbers I gave, you're saying that my cost basis is $1500?

Which is what I put into the TurboTax form for "Cost and other basis"?

The only other thing is that I have no idea what the $200 tax basis is for. This limited partnership is now dissolved, so I will not be receiving any more checks or anything related to this land sale. Is this a problem for later? Do I need to find out what it is from the partnership?

Thank you!