About Rick19744

Rick19744

You should qualify for the exclusion based on your facts. See attached link to Publication 523 and specifically look at page 11. https://www.irs.gov/pub/irs-prior/p523--2020.pdf Exceptions. The following situations of business or rental usage don’t affect your gain or loss calculations. • Space within the living area. If the space you used for business or rental purposes was within the living area of the home, then your usage doesn't affect your gain or loss calculations. Examples of spaces within the living area include a rented spare bedroom and attic space used as a home office. In contrast, business or rental spaces not within the living area affect your gain/loss calculations. As long as the rented bedroom was within your primary home living area, which you indicate is true, you will qualify for the full exclusion. However, any depreciation taken or should have been taken, will be subject to depreciation recapture at 25%. This is Section 1250 gain.

Rick19744

To respond to your questions: 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. 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. 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.

Rick19744

There is some bad information in this string. Distributions have absolutely nothing to do with determining whether the PPP funds were used for eligible expenses in a partnership. Distributions are also not used as payroll expenses for a partnership. I recommend you start a new thread if you have questions related to this area.

Rick19744

Because it doesn't matter why you had the sale, all sales are treated the same. You need to expand on your question.

Rick19744

While your initial facts are brief, I will provide some thoughts: To respond to your question, your sales price is your liquidating distribution. TT will also ask you some other questions: 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. Hopefully your K-1 provides what your share of any Section 1250 gain is 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. 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. Make sure you indicate that this was a complete disposition, as if you have any suspended losses, TT will "free" those up as well. 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.

Rick19744

You are correct in that any loss limitations will reduce your tax basis even if suspended. However, these suspended losses will be freed up upon your complete disposition; assuming you have basis.

Rick19744

If your husband has filed an 1120 for a regular C corporation, then there is most likely nothing that you have to report related to the corporate activity. This is a separate entity and pays its own taxes. The C corporation most likely issues a W-2 to your husband and of course this will be reported on your personal tax return. The only other item that may impact you would be if the corporation paid out any dividends to shareholder's. If they did, these would be reflected on a form 1099-DIV and also reported on your personal tax return.

Rick19744

Regardless of which "disposition selection" you choose, you will get to the same result. Keep in mind that you will need to update your tax basis by the final K-1 items EXCEPT for the distribution amount reflected in box 19. Determine your tax basis as noted above Enter the K-1 items into TT as you have noted TT will at some point ask for "selling price" or some other terminology and this will be your final liquidating distribution. TT will also ask about your tax basis and then enter this as well. I would expect the final K-1 to have a note regarding any Section 751 related to the disposition. This would be your share of any ordinary income recapture on depreciation related to tangible assets. If you do have this information, your overall gain will not change, just the character and how to show this on the return. Having a small gain is certainly not out of the question.

Rick19744

@watermeyer sorry for the time it took to respond. Did not know you responded until someone tagged me in your response. When you own an interest in a partnership, regardless of whether they were acquired at different times, you always have one tax basis. You will need to compute your overall tax basis You then need to determine your overall gain / loss Then determine the percentage of the interest that is short term and long term Then enter each separately on form 8949 which will carry to Schedule D So by way of example; you had 10 units 6 will be long term and 4 will be short term and your overall basis is $10,000 and you received $15,000 giving you a $5,000 overall gain. For the long term gain you would input $9,000 as selling price and $6,000 as cost basis. Just use a date that will provide you with a LT gain result. For your short term gain you would input $6,000 as selling price and $4,000 as cost basis. Just use a date that will provide you with a ST gain result This will give you the overall result of a $5,000 gain.

Rick19744

This question is complicated and since we don't have access to reading the actual language in the trust(s), it is hard to provide a completely accurate answer. In these situations, a bypass trust is really two trusts that are set up upon the death of a spouse; there is the marital trust and then the "bypass trust" or it could be called a credit shelter trust (these are the A and B trusts). This bypass trust, or B trust, is an irrevocable trust. Depending on how this is set up, it may or may not be a grantor trust while your mom was living. Regardless, if your Dad owned the LLC interest, then at this point in time, that interest would be stepped up. It would then be adjusted annually for the applicable K-1 line items. Your interest when that LLC interest is distributed out of the bypass trust, will be the tax basis at that point in time; which should have already included the original step-up. Keep in mind, the change to having to reflect tax capital account reporting for 2020 partnership and LLC's taxed as a partnership will not always be accurate. The individuals preparing these 1065's don't always have all the information available to accurately determine the beginning balance. Also keep in mind, that this figure on the 1065 K-1 item L, is only a tax capital account number. It is not your tax basis. You may want to sit down with a tax professional to make sure you know your outside tax basis beginning point.

Date Registered	‎April 4, 2019 5:51 PM
Date Last Visited	yesterday
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