K-1 Partnership Dissolution

[sntrypilot]

Hi. I apologize in advance if I am not computer savvy in using Turbo Tax community, but I really, really need some help here. I have spent no less than 40 hours trying to enter in a K-1 disposition (not kidding) and I keep getting an obviously wrong answer. Here goes:

On 7/10/2020 I invested in a limited partnership for a real estate purchase. On 9/30/2022 that real estate was sold, liquidated (complete dissolution), money disbursed to partners and company ended.  This seems like it should be simple. The only capital invested was the initial $35,000. There were no distributions other than the $52,251 I received upon liquidation. All activity in 2020 and 2021 are passive. Here are the details:

- Limited Partnership

-Starting investment - $35,000

- K-1 for 2022 is the final K-1

- I select "liquidated"

- I select "complete dissolution"

- Outside basis - $34,351

- Beginning capital account current year (Part 2 L) - $34,243

- Current year net income (Part 2 L) - $18,008

- Withdrawals and distributions (Part 2 L) -  $52,251

- Ending Capital account (Part 2 L) - $0

- 2022 Unrecaptured section 1250 gain (Part 3 9c) - $1,691

- 2022 Part 3, Box 2 - -$6,787

- 2022 Net section 1231 gain (Part 3, 10) - $24,761

- 2022 Distributions (Part 3, 19) - $52,251

- Did any Unrecaptured Section 1250 gain come from estates... or disposition of an interest in partnership - I select "no"

- All of my investment in the activity is at risk

- I have passive activity losses carried over from last year

- no uncommon adjustments

- I have completely deleted the K-1 and re-entered all data

- 2022 Other Information (Part 3, 20) A: $34;     N: $5,217     V: $9,993

- I am able to enter in all the K-1 information

- I select "This partnership ended in 2022"

- No special handling

- The big problem is that I keep getting under Income - Business Items (as shown) a -$33,385 Schedule K-1 and a Sale of Business Property $24,761. This does not seem right. I earned $18,008 in current year net income. My displayed tax refund is like CRAZY high - more than $10,000 when before adding the K-1 it was around $7,500. So on this investment which was extremely profitable produces a tax refund of $3,000+

Again I am so, so desperate here - I am running out of time, taxes due 10/16/2023 and I haven't even done the final review or the state taxes. Please help.

[tagteam]

I will page @Rick19744 

[Rick19744 · Accepted solution]

Since we are post filing deadline, not sure if you have filed the return, however, I will add some commentary:

• Your response to the Section 1250 should be "yes".  You have disposed your interest in the partnership.
• Your cost basis figure is not correct; it should be $52,251 resulting in no gain or loss upon the disposition.
• The sale of the business property is correct as this is gain recognized at the partnership level and passed through to you.  So while you pick this up as income, it also increases your tax basis.
• Also, since this is a passive activity, I am assuming that prior losses were suspended if you did not have any other passive income.  Any prior suspended losses were freed up as a result of the disposition.  This could most likely be a component of why you are getting a refund.  Not positive as I can't see your return and this forum is not conducive to technical reviews such as this.
• Don't panic.  If you go back and determine if something is incorrect, just amend your return.  Not a big deal.  Happens all the time.
• You may be best suited to have a meeting with a tax professional to verify your return is correct.

[sntrypilot · Accepted solution]

I wanted to thank you so much for your post. In the end I was able to find a post that had a nearly identical set of information as me. I used that advice by replacing that post's numbers with my own. I was able to file my taxes (Fed and State) just under the wire on the due date (10/15/2023) but I was still very unsure whether or not my tax form was correct, which caused me much anxiety. With your post I was able to verify that my IRS form was correct and I am very relieved. Again, THANK YOU so much for your help. God bless.  😀

David

[Rick19744]

Welcome