Calculating Partnership Basis for Final K1

Forum|Forum|3 years ago
April 8, 2023
2 replies
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@Rick19744 , @PatriciaV, and any other experts on K1. I was a limited partner in a real estate investment partnership. I'm trying to calculate my final partnership basis to input in Turbotax. My tax basis at the end of 2021 was zero. My final K1 for 2022 has the following values.

Part III:
1 Ordinary Business Income, -292 (I BELIEVE I SUBTRACT THIS FROM THE PRIOR YEAR BASIS SINCE IT IS NEGATIVE)
2 Net Rental Real Estate Income -26,503 (I BELIEVE SUBTRACT THIS FROM THE PRIOR YEAR BASIS SINCE IT IS NEGATIVE)

10 Net Section 1231 Gain 82,880 (I BELIEVE I ADD THIS TO THE BASIS)
19 Code A Distribution 53,967 (I DON'T INCLUDE THIS IN BASIS CALCULATION AS IT IS THE SALE PRICE)
20 Code V (Unrelated business taxable income) 43,345 (I'M NOT SURE IF THIS INFORMATION IS RELEVANT TO CALCULATING FINAL COST BASIS, AND--IF SO--IF I SHOULD ADD OR SUBTRACT IT)

20 Code Z (see statement) (I BELIEVE THIS INFO IS IRRELEVANT TO CALCULATING COST BASIS BUT LET ME KNOW IF I'M WRONG)
All other fields in Section III are empty

I know that the above 19 Code A Distribution figure of 53,967 will be my sale price. I have the dates of purchase and sale. I know that my final cost basis will be the prior year's tax basis adjusted for the above information. Here is my stab at making the calculations for the partnership basis:

Prior Year Basis 0
- 292 (Field 1 Ordinary Business Income)
-26,503 (Field 2 Net Rental Real Estate Income)
+82,880 (Field 10 Net Section 1231)
-43,345 (Field 20 Code V -- Unrelated business taxable income -- REALLY DON'T KNOW IF I SHOULD ADD OR SUBTRACT THIS ONE, OR IF IT SHOULD BE INCLUDED AT ALL)

This gives a final basis of 12,740, but I don't have a lot of confidence if I have included the correct fields or made the right decision to add vs. subtract.

I appreciate your guidance on this. I think I'm close to having the calculation but want to make sure I'm doing this right as it is my first time. Thank you.

Best answer by Rick19744

Some of the figures you noted are not applicable to you.

Your tax basis based on your facts is $56,085

You will input the k-1 amounts.

Since you will indicate that this is a final year k-1, TT will ask for your cost basis which is the 56,085 (this is your figures excluding the unrelated business income as this is only applicable to not for profits).

TT will ask for the “selling price” which is your liquidating distribution of 53,967.

This will then provide you with a small capital loss of $2,118.

TT should put everything in the right place.

Rick19744Answer

Employee

Some of the figures you noted are not applicable to you.

Your tax basis based on your facts is $56,085

You will input the k-1 amounts.

TT will ask for the “selling price” which is your liquidating distribution of 53,967.

This will then provide you with a small capital loss of $2,118.

TT should put everything in the right place.

*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.

TreyAuthor

This makes perfect sense. Thank you very much, @Rick19744.

Rick19744

Employee

You are welcome.

*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.

MC125

Hi, I appreciate the the response to Trey. My question has to do with what seems to be a double counting of capital gains when I enter the selling price and the tax basis, I get a positive figure as capital gain and this figure seems to be added to Part III line 10 of 1251 gain to get a total capital gain. This figure exceeded the distribution, which was the actual money I received for the year. Is that right? I am puzzled and would appreciate any insights. Thank you in advance.

Mike9241

a short summary which could be an oversimplification because we can't see the k-1

look at schedule L beginning capital

that's supposed to be your beginning tax basis

then look at the line that says current income or (loss) note that any amount on 9c is included in line 10 (9c is how a portion of line 10 is taxed),

the sum of the two lines, assuming no amount is on capital contributed during year (you would then add this amount in)

or other increase(decrease) - if not zero, the effect on your tax basis unknown - the partnership would have to provide you with that info

if the partnership was liquidated and no proceeds were received other than distributions on line 19. then line 19 becomes your sales price. you do not reduce basis for this.

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as an alternative you can reduce basis by the line 19 distributions

then use sales price of zero

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if this is not a publicly traded partnership and you received proceeds that were not distributions most likely they would add to sales price.

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however, if this was publicly traded partnership the reporting is completely different. you should have been furnished with a sales schedule to determine proper reporting