How to enter sale information for investment home sale (Schedule K1)

[sanjay-acharya]

5 families purchased a multi-family home through an LLC. We sold the home last year and the sale proceeds was distributed among the 5 families based on their contribution %. Now I am trying to file the schedule K1 through TT (Desktop) for my taxes. For the section  "Enter Sale Information", what do I enter for the following,

1. Sale Price

     Is this the total price at which the home was sold or the sold price per family? For example, if the home was sold at 500K then do I need to enter 500K or 100K here?

2. Selling expense (Is this again, the total selling expense or cost basis for the home or the expense per family's share) 

3. Partnership basis (Again total or per family's basis?)

4. I am assuming here "ordinary" and "1250" gain is per family's data. 

Any help is appreciated.

[PatriciaV]

The sale of property owned by an LLC should be reported by the LLC on the partnership tax return. The net gain or loss from the sale is reported to the partner/members on Schedule K-1. 

Enter the information from Schedule K-1 on your tax return. You are not reporting the sale of your interest in the LLC.

However, if the LLC dissolved after the property sale was completed, you may need to report that you disposed of your LLC interest. These are two separate transactions: 1) the property sale reported on Schedule K-1 and 2) the dissolution of the LLC.

[sanjay-acharya]

Thanks for the information Patricia. Yes, the LLC did get dissolved and each member did get a Schedule-K1. So what I did was,

1. select the option "This partnership ended in 2022".

2. Selected "Complete disposition" in the next screen.

3. Selected "Liquidated Partnership Interest".

4. The next screen is the "Enter Sale Information" which has the below fields,

    a. Sale Price

    b. Selling Expense.

    c. Partnership Basis

    d. Ordinary Gain

    e. 1250 Gain

    Do I need to have these fields filled? If yes, are the above fields just for my share or is it for the total sale? For example if the sale price was $500K total, then should I put in as 100K (my share assuming there were 5 members) ?

Thanks in advance.

[PatriciaV]

Yes, enter the information only for your share of the LLC. Unless you actually sold your shares to a third party, you have no proceeds from the dissolution of the LLC. The payment you received was a distribution from the LLC, not a sale of your LLC shares. However, that distribution does affect your basis in the LLC.

As an example:

Sales Price = 0

Selling Expenses = 0

Partnership Basis: must be calculated (see below)

Ordinary Gain/Loss = zero minus your basis

1250 Gain = likely zero in this situation

Your basis in the LLC would be the sum of all capital contributions you made less any distributions you received plus/minus income/loss reported to you since inception. If you have not kept a schedule of your basis, you may wish to use this worksheet from the IRS, which has specific instructions for what to include: IRS Worksheet for Adjusting the Basis of a Partner's Interest in the Partnership.

[sanjay-acharya]

Actually in my Schedule K1 there is a positive amt listed in Part III 9c "Unrecaptured section 1250 gain" and part 10 "Net section 1231 gain (loss)". Does this change my situation? I assume I need to put the 1250 gain amount in box "1250 Gain" of Turbo Tax page "Enter Sale Information" and still have zeroes in "Sale Price" and "Selling expense". Is that correct? 

section 1231 gain seems to be captured in TurboTax box 10 of page "Enter Information from boxes 8-10"

[PatriciaV]

The information reported on Schedule K-1 will only affect your current year taxable income, potential carryovers, and your basis in the LLC. You would not enter Section 1231/1250 gains/losses again when you report the dissolution of the LLC.