FInal K-1 questions

[mellynlee1]

It seems that TT has changed the way it handles final K-1s. In the past, it would ask if this was a "final K-1" and I would answer yes, and that seemed to be it. Now, I enter "This partnership ended in 2024" to state that it is a final K-1. And that forces me to answer a lot of new questions.

Background: This K-1 is received because we have invested $ in a real estate LLC. They purchased land in 2018, and many people (including us) invested $ for them to purchase it. We are a limited, domestic partner. Now, in 2024, they have sold off all the land, and we have received a final check (which is our portion of the sale) which is why we are getting the final K-1.

The K-1 Footnotes states: this entity is a passive entity, the partnership is NOT subject to the section 163(J) interest expense limitation, income is NOT considered qualified business income, the ending capital account balance represents partner's final cumulative share of partner contributions/distributions plus allocated partnership income/loss through final operations.

In TT, after entering "This partnership ended in 2024", it asks to choose how you disposed of this partnership. I chose "complete disposition" (I assume because we sold all of the property)

Next, it asks "What type of disposition was this?"

Do I choose "Sold Partnership Interest" or "Liquidated Partnership Interest"? (I assume latter, since all of property was sold?)

Next it asks for purchase and sale date for your interest: Do I just put the date they received our check for purchase, and the date we received our final check from the sale as the sale date?

This next part is the hardest part. TT than asks for information on the "Regular Gain or Loss". I need to fill in: Sale Price, Selling Expense, Partnership Basis, Ordinary Gain, 1250 Gain - Where do I find this info?

It also asks for AMT Gain or Loss info -- can I leave this blank since box 17 of the K-1 has nothing in it?

I'd appreciate any help/advice! Thank you!

[RobertB4444]

1.  Liquidated Partnership Interest

2.  Yes, those dates will work fine.

3.  Sale price is the amount you received.  Your basis should appear in the left hand column of the K-1 showing your basis at the beginning of the year and the transactions that occurred during the year to increase or decrease your basis.  Selling expense was zero, and you enter the gain as the type of income that is reported to you on the K-1.  Enter the exact same gain in the AMT space as the regular.

@mellynlee1 

[mellynlee1]

Thank you for your response!

A few other questions: 

You said "Sale Price is the amount you received". This amount is also listed in Box 19A, so I assume I use this number? (It is also the amount of the final check I received on 12/2024).

I'm still not sure how to fill out the Partnership Basis:

On Part II, section L, the following is shown:

- Beginning capital account

- current year net loss

- withdrawals and distributions

- Ending capital account

Do I list the Beginning capital account amount as the Partnership Basis?

How do I figure out the Ordinary Gain or 1250 Gain? My K-1 does not mention anything about 1250 gain, so can I assume I don't have this? 

The K-1 Footnotes lists an amount for Interest Income, and long term capital loss - which have a total net income loss. Do I use this as Ordinary Gain?

And to confirm - you said I should put the same amounts (partnership basis, ordinary gain, 1250 gain)  in AMT Gain or Loss?

Thank you!

[RobertB4444]

19a is cash and marketable securities.  So your income may just be ordinary income.  Enter it as such.

Use the beginning capital account as your basis in the partnership.

Yes, just copy the numbers into the AMT boxes.

@mellynlee1 

[mellynlee1]

Thank you.

However, I did not see your answer for the following question:

How do I figure out the Ordinary Gain or 1250 Gain? My K-1 does not mention anything about 1250 gain, so can I assume I don't have this? 

The K-1 Footnotes lists an amount for Interest Income, and long term capital loss - which have a total net income loss. Do I use this as Ordinary Gain?

[DaveF1006]

No.  You would not use interest income and long term gain as ordinary gain.  These are completely different in how they are treated for tax reporting purposes. Usually any gain from the sale of investment property is treated as "investment" gain. However, in some cases, part or all of the gain may be treated as "ordinary" gain. 

In your instance, the sale of the land may be a ordinary gain or a capital gain depending on the nature of the sale. Your documents you received should disclose the nature of the sale.

Ordinary gains receive slightly different tax treatment than investment gains. Review the documents you received with your Schedule K-1 for information about how much of the gain is "ordinary", if any. If there is no ordinary gain to report, then leave that section blank because you have no information to report in that section. Leave out the 1250 gain as well if it isn't disclosed in the documents.

[Mike9241]

is schedule L completed on your K-1

it is supposed to be on the tax basis

so if this is true you basis would be:

beginning capital +

capital contributed +

current year net income OR -

current year net loss -

distributions that were not your final distribution =

your tax basis

hopefully, your tax basis  is the same as your final distribution

in theory, if you've owned the same interest since it began and there were no special or disproportionate allocations in any year your basis should equal the final distribution so no gain or loss.

[mellynlee1]

Thank you!

So from your reply, you are saying that my Tax Basis is equal to the Ending capital account as listed in Part II, section L of my K-1? (An earlier responder had replied that it should equal the Beginning capital account.)

I'm still not sure what to put as "Ordinary Gain", or "1250 Gain". I'm assuming the latter is nothing since I have no mention of 1250 Gain anywhere in my K-1. However, I DO have 2 distributions listed in box 19:

A - 1797

C - 174

When I enter this information into TT, the code C entry tells me I may need to file a new Form 7217. However, from another post, I assumed I didn't need to because of the following exclusion:

1. Do not file Form 7217 if the distribution consisted only of money or marketable securities treated as money under section 731(c).

My distribution is only money. As a limited partner, I gave them some $ in 2018 to purchase land, and throughout the years, I have received $ as they sell some of the land. This final K-1 is the final cash distribution from the final sale of the land.

I looked at the instructions for Filing K-1 (page 26) that explains box 19, code C, and it lists a lot of information regarding adjusted cost basis, and that I need to file a form 7217.

This is what Part II, section L (Partner's Capital Account Analysis) reads:

Beginning capital account: 3604

Current year income/loss: -609

Withdrawals and distributions: 1971

Ending capital account: 1024

Please help me fill out the following section, and let me know if I need to file Form 7217 or not.

This is what I have filled out so far:

Regular Gain or Loss

Sale Price: 1797 (this was the check I received in 12/2024 for final sale, also listed in box 19, code A of K-1)

Selling Expense: 0

Partnership Basis: 1024 (this is the Ending capital account listed in Part II, section L)

Ordinary Gain: What do I put here?

1250 Gain: I assume I can leave this blank?

AMT Gain or Loss

Same Partnership Basis, Ordinary Gain, and 1250 Gain as listed above

Any help/advice is appreciated!

[RobertB4444]

We can't tell whether you have section 1250 gain.  As @Mike9241 said you should have had a schedule L included with your K-1 to tell you what kind of gain you have.  If it was not included you should contact the partnership to figure out what type of gain this is.

You do not need to fill out form 7217 for a cash payment for property.  However, 19c indicates that something else was given to you instead of cash for that $174.  You need to contact the partnership to find out what that was.

Using your numbers your basis in the partnership at the time of the distribution was $2995 - the beginning capital account minus the loss for the year.  That left you with a $1024 basis in the partnership when it shut down which is your loss on the sale.  

@mellynlee1 

[mellynlee1]

I did not have a Schedule L with my K-1. There is a SECTION L on my K-1 that I mentioned in my posts...but that is not what you mean?

I am thinking that the pertinent information from Schedule L is in the Section L, along with what was stated in the K-1 Footnotes.

As I noted in my original post:

The K-1 Footnotes states: this entity is a passive entity,

the partnership is NOT subject to the section 163(J) interest expense limitation rules,

section 199A - income is NOT considered qualified business income,

the ending capital account balance represents partner's final cumulative share of partner contributions/distributions plus allocated partnership income/loss through final operations.

Also, the Footnote states:

The Property distributions reflected in Box 19C represent the partner's share of syndication costs which are nondeductible to the partnership under IRC Section 709.

It also shows the following:

Interest Income: 11

Long-term capital gain (loss): -620

Schedule K-1 Income Subtotal: -609

Net Income (Loss) per Schedule K-1: -609

Does this give the necessary information needed to fill out the TT section?

Or do I still need to ask the partnership for more information?

[RobertB4444]

Using that I would be comfortable saying that you don't have any section 1250 income.  

However, nothing that you have here explains what the extra $174 in property is that you have in box 19c.  You received a check for the amount in 19a.  The property in 19c you did not receive but it is being reported on your K1 as having been sent to you.  You should find out what that is so that you know how to report it.

@mellynlee1