Answering "Describe Partnership Disposal" Question For a Final K-1

[Ryuichi1]

I received the first and final 2022 Partnership Form 1065 Schedule K-1 for a partnership that closed in 2022 where I was a limited partner. Unfortunately the only investment made by the partnership turned out to be unsuccessful and my whole contribution to the partnership was lost. So there is a net long-term capital loss (box 9a) and the ending capital account is zero (box L). Which option should I pick in response to the "Describe Partnership Disposal" question?

1. No Entry
2. Complete disposition
3. Disposition was not via sale
4. Sold and am receiving payments

I'm guessing #4 isn't applicable so I'm looking for help to pick between #1-3. Options #2-3 are asking for a sale date in subsequent questions but there was no actual sale since the entire investment resulted in a loss.

Thank you

[Mike9241]

there should be a box for partnership discontinued in 2022. this does not require entering sales info. I'm also wondering about the reporting as Long Term since the partnership apparently was in existence less than 1 year  

[margueritekeller]

i would use the date of the notice with the dollar amount invested resulting in a loss

[Ryuichi1]

@Mike9241 

Where is that "Discontinued in 2022" box exactly? Which option out of the 4 above should I select to get to it? 

There is a "This partnership ended in 2022" box under the "Describe the Partnership" question but selecting that leads me straight to the "Describe Partnership Disposal" question that I'm asking about.

Also, the partnership existed for several years bit did not result in any income/sale - hence there were no previous K-1s. So this should still be a LT loss I think.

[Ryuichi1]

@Mike9241 

By "this does not require entering sales info" do you mean that I should select "Disposition was not via a sale" and leave the purchase/sale dates blank or simply choose "No Entry"?

Thank you

[RobertB4444]

Yes.  The disposition was not via a sale - it was because it closed.  You can enter sales information for the partnership.  It's not a real sale but it can count as one.  It sold for zero dollars and the basis is whatever you put into the partnership that you lost.  Use the date that you knew it was now worthless as the sale date.  That can be when you received a letter or a phone call or whatever.  but the day that you knew the investment had become worthless is the date of disposition.

@Ryuichi1 

[Ryuichi1]

Thank you, @RobertB4444. I looked at the forms and selecting the "Disposition was not via a sale" option results in checking the "Check if gifted partnership interest" on the Form 1065 Additional Information worksheet. This is definitely not true in my case. It seems like I have to select the "No entry" option as the other three aren't a good match for my case...