Partnership Asset Transfer

[RonFL]

How do you record an asset transfer to a partners capital account in turbo tax business w/o the transfer of cash just swap equity for property?  Which is the correct option to select in turbo tax on why the asset was no longer used? 

[Anonymous_]

Did you distribute the property to a partner?

@Rick19744 

 @Mike9241 

[RonFL]

Yes the property is distributed to a partner. It looks like the best option in Turbo Tax is to use the property sold option in the "tell us why you stopped using the asset page " and just take the current asset basis amount off the books and the same amount off the partners capital account. The partners capital account will be reduced by the same cost of the asset so there would be no gain or loss on the sale. 

[Mike9241]

you are correct on the treatment except if the property distributed was originally contributed by the partner receiving it and had a built-in gain. if so the following applies.

*box 19 code B  Distribution subject to section
737. If a partner contributed section 704(c)
built-in gain property within the last 7 years
and the partnership made a distribution of
property to that partner other than the
previously contributed built-in gain property,
the partner may be required to recognize
gain under section 737. This gain is in
addition to any gain recognized under
section 731 on the distribution.
When this occurs, the partnership will
enter code B in box 19 of the contributing
partner's Schedule K-1 and attach a
statement that provides the information the
partner needs to figure the recognized gain
under section 737. The partnership is
required to provide the following information.
• The FMV of the distributed property (other
than money).
• The amount of money received in the
distribution.
• The net precontribution gain of the
partner.

[Rick19744]

Not sure we have all the facts:

• Is property being distributed to the partner in liquidation of their entire equity interest?
• Is property being distributed to the partner in lieu of a cash distribution?
• Was the property contributed to the partnership by any partner? Or purchased by the partnership?

[RonFL]

It is being distributed in lieu of cash to remove the asset from the partnership.

[RonFL]

No the property was not contributed by the partner but bought by the partnership. So there is no gain or loss on the transfer. The property is being transferred at the value of the partnership and the capital account of the partner who is receiving the asset is being reduced for that amount.  The question is which of the Turbo Tax for Business boxes is the correct one to use in the program to make the entry track to the K-1 correctly. It seems that the "sold" selection tracks correctly to the K-1 unless we are missing something.

[Rick19744]

In reading the original question / facts you note ".....just swap equity for property".

I'm not sure what the impact is on the partner receiving the property.

• Still a partner with no equity change?
  • If "yes" what did the other partner(s) receive?
• Still a partner, however, there was a reduction in equity?
• Partner no longer a partner; received a property distribution in liquidation of their partnership interest