K1 for a partnership that closed in 2018 notes sch L syndication costs may be deductible as a capital loss. How do I do that?

Forum|Forum|6 years ago
June 5, 2019
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I invested in a REIT in 2008 which ended in 2018 (and didn't make much $$). The K1 Part II section L "Ending capital account" ends up at 0, but there is a note that says "Included in your schedule L is your share of syndication costs which may be deductible as a capital loss" with the amount at nearly $3K. How do I take advantage of this using TT and how do I know if the amount is indeed deductible?

Also, what is the proper way to indicate to TT H&B or on the IRS forms that the partnership was closed out? Which type of disposition is correct?

TurboTax Home & Biz Windows

Best answer by Rick19744

Ok. Based on your responses:

Since Section L is GAAP, you need to determine your tax basis in the investment.
Since Section L is GAAP, my question #3 is moot.
To determine your tax basis, you start with your original capital contribution. This beginning amount is adjusted annually by the applicable lines on your K-1. Below I will include a link to the K-1 instructions that has some guidance on maintaining your basis schedule.
Once you have determined your basis through the final K-1, add the $3,000 syndication costs to your basis based on the note to your K-1.
Now you are ready to determine your overall gain or loss. If you still have a positive basis after adjusting for the final K-1 and liquidating distribution, then this is a long term capital loss. If your basis is negative, then you have a long term capital gain to the extent of the negative figure. These amounts are reported on Schedule D and the applicable form 8949.
Make sure you indicate in the K-1 input area that this is the final K-1.

https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf

The basis discussion and worksheet is on page 3 of the K-1 instructions.

Rick19744

Employee

A couple of questions:
1) Have you maintained a basis schedule of your investment?
2) Section L of your K-1. What box is checked?
3) Section L of your K-1. Is your beginning capital positive or negative?
4) Do you have suspended losses?
5) Do you have an amount reflected in box 19 code A?

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

scpanishAuthor

Employee

Thanks for the quick response!  This is the first time I have closed out a K1.  Here are answers, as best I can give them:

1) No - but I know the original investment and I have all the K1s.  I presume that is what is tracked in section L of the K1.   I also have the annual accounting statements, somewhere, on file.  I think.

2) GAAP

3) Positive.  Beginning capital = 3080.  Current year increase -3007  Withdrawal/Distrib -73  (that was the final distribution)  Ending capital  0

4) No suspended losses.

5) box 19, code A is the $73 final distribution.

Thanks in advance for the help.  If it's no go so be it.

Steve

Rick19744Answer

Employee

Ok. Based on your responses:

Since Section L is GAAP, you need to determine your tax basis in the investment.
Since Section L is GAAP, my question #3 is moot.
To determine your tax basis, you start with your original capital contribution. This beginning amount is adjusted annually by the applicable lines on your K-1. Below I will include a link to the K-1 instructions that has some guidance on maintaining your basis schedule.
Once you have determined your basis through the final K-1, add the $3,000 syndication costs to your basis based on the note to your K-1.
Now you are ready to determine your overall gain or loss. If you still have a positive basis after adjusting for the final K-1 and liquidating distribution, then this is a long term capital loss. If your basis is negative, then you have a long term capital gain to the extent of the negative figure. These amounts are reported on Schedule D and the applicable form 8949.
Make sure you indicate in the K-1 input area that this is the final K-1.

https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf

The basis discussion and worksheet is on page 3 of the K-1 instructions.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.