Final K1 with a Positive Ending Capital Account

Forum|Forum|4 years ago
April 8, 2022
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I received a Final K1 with an Ending Capital Account amount with a positive 39,400. I also have a Net Section 1231 gain of 132,339. My understanding is that I should be able to offset the 1231 Gain with my Ending Capital Account amount. If this is correct where in TT would I enter the 39,400? When reviewing past posts someone responded and said to enter zero when TT asked what is the sale price, and enter in Cost basis as the Ending Capital Account amount. Not sure if this is correct. Thanks for any help.

Best answer by Rick19744

We actually received 25,000 original investment plus 55,201 our portion of the selling price for a total of 80,201. This does not match the distribution amount on the K1 which show 91,513.

Our ending capital account amount of 39,400 which is our tax basis is correct.

I have not entered the selling and cost basis price because when I enter these amounts it makes my gain increase more with a gain of 41,101 and it also doubles my 1250 gain because it asks me to enter this again. I had entered the 1250 amount on a previous worksheets. This cannot be correct.

When I look at my Schedule D I now have a Capital Gain of 173,440! How can this be correct when we only received the amount I listed above of 55,201 plus our original investment of 25,000. Before the capital computation our regular income is only 37,476.

After entering it says my tax is 19,664.

What am I missing?

@Ruby14

If you are saying you agree with the tax capital basis as equaling your tax basis, then I would use this amount.

What this is saying is that you have a capital loss on the transaction that has not been accounted for.

I would input the selling price as the distribution of $91,513 which agrees to the K-1 (I can't explain why this doesn't tie to what you are stating, but if the ending tax capital is correct, then we will use this amount).

Next, for the cost basis, you need to input $130,913. This will then give you your $39,400 capital loss.

This amount is arrived as follows: Your ending amount of $39,400 has been reduced by the $91,513 distribution. You need to eliminate that distribution and you do so by adding it back to give you the $130,913.

Hopefully this will get you closer to what you were expecting.

Rick19744

Employee

I will provide some comments:

As a member / partner in a partnership you are responsible for maintaining your tax basis in this investment.
Your tax basis most likely will not equal what is being reflected on your K-1 as tax capital.
What you need to do is determine what your tax basis is at the beginning of 2021.
Update your tax basis for all applicable line items on your final K-1 EXCEPT for any distributions reflected.
Once you have determined your tax basis and go through the TT questions, you will now have the information to input. Your selling price will be the distributions reflected on your final K-1 and your cost basis will be your tax basis. TT will handle the rest.
When computing your tax basis you can compare it to what is reflected as your tax capital just to see if everything makes sense. But as noted, the amount on your K-1 is most likely not equal to your tax basis.

*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.

Ruby14Author

We have had this Partnership/LLC since 2017 at that time the Tax Basis Box was checked. Does that mean that this will be the tax basis you are referring to in your post for 2021? Each year on my K1 they have brought forward my ending capital from the previous year and either added or subtracted any gain or distributions and then I had by ending capital amount.