Schedule K-1, box 9c & Box 10 causing double gains reporting

Forum|Forum|6 years ago
April 11, 2020
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I have equal amounts being reported in both box 9c and Box 10 reporting the sale of a partnership. All of my net 1231 gain is also unrecaptured 1250 gain. In Turbo Tax, my income summary lists my capital gains as the sum of both of these numbers - making my income too high and therefor my taxable income too high. How can I only report the true amount of gain accurately if both of these boxes contain the same numbers? Is there a way to get the capital gains to show as this number... not double the number?

MRehbergAuthor

Add-on: It appears that the gain is being listed on Form 4797 AND through Schedule D for long-term gains - this is causing the doubling. Is it safe to delete Form 4797...appear to be the only way to correctly state my income/gains.

DaveF1006

You have both Section 1250 and 1231 gains from this transaction.

Capital gains on certain section 1250 property are subject to a maximum capital gains tax rate of 25%.

Unrecaptured Section 1250 gain is long-term capital gain, not otherwise recaptured as ordinary income. This type of income is attributable to prior depreciation of real property that was held for more than one year.

Review the documents you received with your Schedule K-1 for information about how much of the gain from the sale would be considered Section 1250 gain, if any.

So no, this reporting is correct so don't delete your 4797 because this is reported correctly.

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MRehbergAuthor

Ok - I didn't think it made sense to just delete that form either. But, is it considered correct then that TT is doubling the amount showing as capital gains? I'm not sure how to get that to only show 1 times the amount, even though it is considered both a 1250 & a 1231 gain. It is affecting my AGI number and really increasing my tax due.

artshep

I won't comment on whether your software is correctly or incorrectly applying your K-1 information, but the key concept to understand is that "unrecaptured 1250" gain is a sub-category of "net 1231" gain. In other words, these are not mutually exclusive categories that are added together to obtain your total gain. Rather, the number in box 9c (unrecaptured 1250 gain) represents the amount of your 1231 gain that was categorized as unrecaptured 1250 gain. That's why they are the same number, i.e., all of your 1231 gain is categorized as unrecaptured 1250 gain and is therefore taxed at 25%.

This link provides a very comprehensive, but easy to follow, explanation:

https://www.forbes.com/sites/anthonynitti/2015/07/14/tax-geek-tuesday-the-different-types-of-gain-making-sense-of-sections-1231-1245-and-1250/?sh=3c2e94777902