K-1 and Form 4797

Forum|Forum|3 years ago
June 17, 2022
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Last year we sold a farm that had been owned by an S-Corp. I have all the stock blocks needed to establish the stock basis when the books were closed on 12/31/2021.

I understand that Form 4797 will be used to report this transaction. Do I use the amount shown on Line 16 (code D) items affecting shareholder’s basis on the K-1 from the corporation as the sales price or some other amount (such as my share of the actual sale price of the farm)?

As always, thanks for any and all help.

Anonymous_

Level 15

You might want to seek guidance from a tax professional for this scenario.

Regardless, it is somewhat unclear whether the S corporation, itself, sold the property or whether the property was distributed to you, at some point, and you sold the property (and then, thereafter apparently, the corporation was dissolved).

I will page @Rick19744 for further input as to the basis, valuation, et al.

Lavash1Author

Level 2

Thanks for getting back. The S-Corp sold the property, and I received a cash distribution.

Rick19744

Level 13

Raw land, no depreciation.

Based on the original question and follow-up responses:

You indicate that your final K-1 has an amount on line 16 code D.
- Does this represent your liquidating distribution?
- Technically the liquidating distribution should be reported on form 1099-DIV and NOT the K-1
Your facts also indicate that you only received cash as a liquidating distribution.
- As such, you need to input the items reflected on your K-1 in TT just as any other year
- You then need to update your tax basis (form 7203)
- Do not adjust your tax basis for the liquidating distribution
You will have two levels of tax
- The first is associated with the sale of the land reported on the K-1. TT will handle this based on your input.
- The second is the difference between your stock basis and your liquidating distribution
- This second level of tax will be reported on form 8949 and then Schedule D
- TT will ask questions related to the final K-1. It is here that you will input your stock basis (not adjusted for the liquidating distribution), and then the selling price will be the liquidating distribution amount.