K-1 box 19 code C for a limited partnership that has closed and given a final K-1, given partnership's adjusted basis and fair market value, how do I enter this?

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March 29, 2022
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A limited partnership that I bought into in 2008 has closed and issued a "final k-1". The value of the shares was transferred into a new REIT. There isn't much on the K-1, but I don't know the correct way to enter this last K-1. There is info only in box L (ending account of 0), box 13 code W, and box 19 code C. The latter is confusing, there is a "partnership's adjusted basis" which is not too far off from my initial investment, and a "fair market value", which is much lower and is the amount invested into a REIT by the same management company. The K-1 IRS docs talk about tracking basis - I've been using TT the entire time I've had this investment and always entered the K-1 info, did that track basis? The actual basis is the initial investment amount. This investment overall is a loss. How do I enter this K-1 info into TT correctly, or at least in some simple way that won't get me into trouble even if I don't minimize any tax?

TurboTax Online

Best answer by AliciaP1

Yes and No. Yes, there is something else to do besides enter the FMV for the distributions and no, don't enter the FMV as the distribution. You need to enter the Partnership's Adjusted Basis for the distribution amount.

Your basis is another term for the value of your investment in the company as of a specific date. The "FMV" represents value at the point of transfer - so the ending value in the Partnership and the beginning value in the REIT. This value is calculated from your initial purchase (or investment), which is represented by "Partnership's Adjusted Basis", plus or minus any income or loss over the operating years minus any other distributions taken over the years. The "adjustments" have been reported in various boxes of your K-1s throughout your ownership and have already been reflected on the appropriate year's returns. So, since the FMV is less than the Partnership's Adjusted Basis you have already reported this loss. If you enter this FMV this year, you will be "doubling" the loss you have experienced and your return will be delayed and adjusted by the IRS.

@scpanish

AliciaP1

You need to enter your K-1 as you have in previous years with the exception of marking that the "partnership ended in 2021" and "Disposition was not via a sale". You will then be asked for a "Purchase Date", which is the date you invested, and a "Sale Date", which is the date your investment was transferred to the new REIT. Continue through the rest of the interview with the details that are shown on your K-1.

See Where do I enter a K-1 that I received? if you need more information on how to enter your K-1.

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S

scpanishAuthor

Employee

Thank you Alicia. I apologize for the lack of clarity. My problem is with the K-1 box 19 code C entry. Turbo Tax wants a single "distribution" amount. My K-1 instead has two figures, a "Fair Market Value" ($29K) which is what really was the investment to the new REIT, and a "Partnership's Adjusted Basis" ($36K). If I enter the FMV and finish the return there are no errors. But this does not capture the reality that there is a loss, which I think is roughly the $29K minus the $36K, or about $7K. So I wonder if just entering the FMV as the value will get me into trouble further down the line, or misses a deduction. Is there something to do other than enter the FMV as the distribution? Thanks for your attention.

AliciaP1Answer

Yes and No. Yes, there is something else to do besides enter the FMV for the distributions and no, don't enter the FMV as the distribution. You need to enter the Partnership's Adjusted Basis for the distribution amount.

Your basis is another term for the value of your investment in the company as of a specific date. The "FMV" represents value at the point of transfer - so the ending value in the Partnership and the beginning value in the REIT. This value is calculated from your initial purchase (or investment), which is represented by "Partnership's Adjusted Basis", plus or minus any income or loss over the operating years minus any other distributions taken over the years. The "adjustments" have been reported in various boxes of your K-1s throughout your ownership and have already been reflected on the appropriate year's returns. So, since the FMV is less than the Partnership's Adjusted Basis you have already reported this loss. If you enter this FMV this year, you will be "doubling" the loss you have experienced and your return will be delayed and adjusted by the IRS.

@scpanish

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