K-1 Turbo Tax Question
Bob L
year the partnership has sent me K-1s which I have entered into Turbo Tax.
Last year the partnership was dissolved and I received a Final K-1.
Questions:
1. The standard form K-1 line I (I as in "eye" and not 1 as in one) has a
box for "Final K-1". The Turbo Tax K-1 only has a box that you check if you
"you completely disposed in your interest in this partnership...". Do I
check this box if the partnership has been dissolved (and not sold)?
2. The Final K-1 indicates that I have capital account at the begining of
year 2001 of some $600 and a final distribution of some $300 at end of year
2001. Do I account for the $300 capital loss on Schedule D?
I know I should hire a CPA for this stuff but the dollars are so small, I'm
hoping avoid the cost.
Bob L
R. C. White
We had a discussion here a week or two ago about reporting the disposition
of a partnership interest. In that conversation, I never learned whether
the partner had sold his partnership interest, had it redeemed by the
partnership itself, or made some other disposition. Your case seems, from
what you said, to be easier to handle. However, slight factual differences
that you may have not mentioned because they did not seem important to a
layman may significantly change my answer. It would still be a good idea to
discuss this with a competent CPA in your own state.
In the simplest situation, a partnership interest is kind of like a savings
account. If you put $1,000 in the bank and took out $1,050 a year later, it
might seem that you had a $50 capital gain. However, if you first recorded
the $50 interest earned and the corresponding $50 increase in your "basis
for determining gain or loss", then your withdrawal of $1,050 would properly
show a zero gain.
In the same way, if you properly record your share of the partnership's loss
for the year, it might reduce your capital balance to $300, which would
exactly equal your final distribution, leaving you with no capital loss on
"disposition" of your partnership interest. This is the simplest situation
and, in your case, it may be the proper one. Go ahead and record the
transactions shown on your K-1. (Remember that your share of the
partnership income or loss may need to be scattered over several lines in
your 1040, depending on the kind of income and deductions that the
partnership had.) Hope that your capital balance after your final
distribution is zero. Then, just to clean things up, you might report on
Schedule D your disposition of a partnership interest - basis $0, proceeds
$0, gain or loss $0; acquisition date would be the day you joined the
partnership. If your K-1 shows your final balance to be $300 (immediately
before the final distribution), then report your basis and proceeds as $300;
the gain or loss will still be zero. Yes, check the box that says you
disposed of your entire interest, so that the IRS will not be surprised when
this partnership does not show up on your return next year.
Just be aware that partnership taxation can get very complicated very fast
and any deviation from "simplest" can make my advice entirely inappropriate.
RC
--
R. C. White, CPA
(Retired - no longer licensed to practice)
San Marcos, TX
r...@corridor.net
"Bob L" <Xrolli...@compuserve.com> wrote in message
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Bob L
turns out, my original post is a bit off base because the $600 beginning of
year capital account is not relevant. I inherited the Limited Partnership
shares in 1989 from my father's estate. The estate executor (me) and the
estate's CPA established a date of death of $4000 which was the amount my
father originally paid a year or so before his death. Upon settlement of
the estate my wife and I received the shares which, according to the initial
K-1 we received for tax year 1989, was valued at about $2700.
The LP used this $2700 as the 1989 capital account value which, according to
the current and final K-1 is now reduced to zero. However, the $1300 loss
has never been accounted for. My CPA friend suggested that I now take the
$1300 loss on Schedule D which is what I'm going to do. I suppose that I
could have taken this loss back in 1989 but I didn't know that then.
Bob L
"R. C. White" <r...@corridor.net> wrote in message
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R. C. White
I'm glad you talked to your CPA friend. As I said, even a slight variation
from the "simple" partnership facts can trigger major complications - and
your situation certainly qualifies for that!
There are several factors in your situation, each of which could send a CPA
back to the tax books for a half-day or more of research. There's the
general rule about the basis of property "acquired from a decedent" - in
other words, inherited. Then there are all the special rules that adapt the
general rule when the inherited property is an interest in a partnership.
Then there are the optional adjustments that may or may not be made on the
books of the partnership itself. These may result in the partner's (that's
you, after your father's death) having a "special basis" in the partnership
property - which may mean different depreciation calculations for you, after
the depreciation for the partnership itself has been calculated, each year
for many years.
I'm not about to get into explaining (what I remember of) all that. I'll
just repeat what I've said several times: Any variation from the simplest
facts can make partnership taxation, especially the disposition of a
partnership interest, far too complicated for any layman to tackle - even
with TurboTax - without the help of a competent tax professional.
RC
--
R. C. White, CPA
(Retired - no longer licensed to practice)
San Marcos, TX
r...@corridor.net
"Bob L" <rolli...@compuserve.com> wrote in message
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