Schedule K-1 - Sold Rental Property, Dissolved Partnership LLC, Confused How to Enter Info.

[Digifreek]

My partnership LLC sold our one property and the LLC was dissolved.  In the schedule K1 section, Premier is asking for the sale price. 

Is this the price of the building or my share of the proceeds?  

Please help!

[M-MTax]

@Rick19744 

[Rick19744]

While your initial facts are brief, I will provide some thoughts:

1. To respond to your question, your sales price is your liquidating distribution.
2. TT will also ask you some other questions:
   1. Your cost - this will be your tax basis in the LLC so hopefully you know what this is.  If not, you will need to determine this.
   2. Hopefully your K-1 provides what your share of any Section 1250 gain is
   3. I would also assume that there was some Section 1245 property as well.  TT will also ask if you have any Section 751 gain.  This is what is known as "hot assets" (which includes depreciation recapture on Section 1245 property).  The K-1 should technically provide your share of this gain as well, although it is a 50/50 bet as to whether or not this is provided.
   4. The Section 751 gain is a recharacterization of your total gain / loss.  This represents the portion of your overall gain / loss that is ordinary income.
3. Make sure you indicate that this was a complete disposition, as if you have any suspended losses, TT will "free" those up as well.
4. Depending on your facts and $$ involved, you may want to consider meeting with a tax professional to determine your overall gain / loss and application of any Section 751 recharacterization. 

[Digifreek]

Thanks Rick!

If I understand correctly, you're saying the liquidating distribution is the return of my capital funds plus my share of the proceeds from the sale of the building which is  what I enter for sale price in Turbotax correct?

Regarding the 1250 gain yes my K1 provides this info.  It makes no mention of any 751 gain though.  I'm guessing because we held the building for only three years and didn't have to make any substantial improvements and only minor repairs.  

This was a small unfurnished apartment building.   Am I right in assuming that in this case there is no 1245 property to report?

[Rick19744 · Accepted solution]

To respond to your questions:

1. The liquidating distribution is just your sales proceeds on the termination of the LLC.  This is what you show as your selling price in TT.
2. The $$ used to make the liquidating distributions to the member's was made up of a combination of any cash on hand and the sales proceeds that the LLC received on the sale of the building.
3. Without understand exactly what tangible property was in the rental (if any) I can't say whether there is any Section 751 recharacterization.  At this point, you have to go with what the K-1 reflects.  That's all you have to go on.