Question

Any tax on selling my share of a partnership in 2019?

Forum|Forum|5 years ago
July 9, 2020
1 reply
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I was a general partner in a partnership for 10 years that owns an apartment building. In 2019 I sold my share of the partnership to one of the other partners for what I initially invested. I received a down payment and monthly principal and interest payments in 2019 based on an applicable 72 month amortization table. I received a 1099 for the interest I received. No tax forms received for principal received. I ended up receiving the balance of my initial investment in January of 2020. For 2019 taxes while having to declare the 1099 interest as income, I don't think I need to declare the down payment and principal payments received in 2019 as capital gains or ordinary income because I'm only getting back what I initially invested in the partnership. Appreciate any insights and input. Thank you. TC6375

DavidS127

Firstly, unless you "elect out" by the due date of your tax return, the sale of your partnership is treated as an Installment Sale by the IRS because you'll receive at least one payment after the tax year in which the sale occurs. See IRS Topic 705 for an overview of Installment Sales.

Secondly, the calculation of your gain on the sale of your partnership is typically more complicated that the difference between the sale price and your original investment. So, you'll need to calculate your adjusted basis in the partnership to know the total gain you must report. Refer to this section of IRS Publication 541 for the Adjusted Basis rules for a partnership.

TurboTax can calculate the correct amounts in your tax return, once you know the variables and whether you want to elect out of installment sales treatment.

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