Schedule k-1 LLC Partnership for Rental Properties (Various States) After Sale

[embedded_guy]

Hi,

I invested in some partnership LLC that have rental properties in various states. In this case initial investment was in 2014 and the properties were sold in Texas in 2020 and I received the Schedule K-1.

I am not sure if I only need to enter the K-1 information or if there is additional information (not sure on what form) that will show my initial investment (cost basis of the investment) and offset the gains from the sale.

Any help is appreciated. 

Thanks

[DavidD66 · Accepted solution]

Your K-1 should report your share of the gain from the sale of the properties in Texas.  Based on what you've described, the only thing that was sold was some of the properties owned by the LLC.  You would still own your interest in the LLC.  The sale of the Texas properties would be a taxable event, that will flow through from the K-1 to your tax return.  If the LLC distributed some or all of your share of the proceeds from the sale, then that would reduce your basis in the LLC.  In this case, the only thing you would need to enter is your K-1.

[embedded_guy]

@DavidD66 Thanks for the response. Yes, both properties were sold in the LLC and there were two distributions for the gains from each property sale, and then a return of initial capital invested. I'm not sure why this K-1 is not marked final K-1 if all the properties have been sold. It wasn't clear to me where the initial investment is deducted because I see values in the net rental real estate income/loss (box 2) shows a loss, there are also values in Unrecaptured section 1250 gain (box 9c), and  Net section 1231 gain/loss (box 10).

I understand how the cost basis is done in a mutual fund sale (with 1099-B), but this type of investment isn't clear to me.

I can see the initial investment (from 2014) is tracked in the partner's capital account analysis (section L). Where each year distributions are subtracted since 2014 and the ending capital account value is shown.

It's also not clear if I can go back and enter in some where the prior years losses (from box 2 - net rental real estate income/loss).

But if this captures everything and I only update my ongoing k-1 for this investment, I understand.

Thanks

[DavidD66 · Accepted solution]

Based on what you have described, and the lack of any other guidance from the LLC, I would say you just enter your K-1.