How do I report a 721 transaction in turbo tax?

Forum|Forum|4 years ago
August 11, 2021
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I've owned shares in a rental DST for over 3 years. Now the DST sponsor wants to do a 721 transaction to contribute the DST assets into an Operating Partnership and issue OP Units (Operating Partner Units) afterwards. K-1's will be issued instead of 1099's after the721 transaction is complete. My question is: How do I report this in turbo tax? How do I report that I stop using the rental DST and move on to the OP Units? Are there specific forms to use to report this?

Anonymous_

Employee

There may or may not be a significant change, but that can only be determined by contacting the sponsor of the DST directly who, in turn, should be able to provide you with the necessary tax guidance.

Since DSTs operate much like limited partnerships, there might not be much of a change beyond exactly how reporting is done in the program (e.g., entry from an issued K-1 (1065) versus a 1099-MISC).

VK2020Author

Thanks for the reply. The DST sponsor will indeed work with individual investor to, at the very least, transfer the individual's cost basis info of the contributed assets to the K-1. My question, specifically, is how do I make the transition from reporting the DST income under the "Rental Properties and Royalties" category (1099-MISC) to the "Business Items" category (1065)? I assume the DST entry under the "Rental Properties and Royalties" category must be removed since I stop using it under that category. But how do I PROPERLY remove it? What's the disposition? It's not a sale since I didn't sell it, it merely got transferred/contributed to the new partnership. Looks like there's a section under "Asset/Depreciation" where I can indicate that I stopped using the asset but I am not sure if it's the right place for this. Some guidance on how to navigate this in Turbo Tax would help. Also, even after properly removing the DST from "Rental Properties and Royalties", there still seems to be some missing steps to link-up the new partnership with the terminated DST. Unlike a 1031 exchanges where Turbo Tax does have built-in sections for, I didn't find anything similar for 721 transactions. That's why I had previously asked whether there's a specific form to report 721 transactions. If not, then I guess I must provide my own statements to provide details of the the missing link?

Anonymous_

Employee

You might want to contact phone support for this scenario, particularly if you are using an online version of TurboTax.

What is the TurboTax phone number? (intuit.com)

Otherwise, I do not believe there is some sort of method of linking the two (Schedule E and partnership K-1); you might simply have to indicate that you converted the property to personal use to remove it from your Schedule E. However, you might also want to include an explanatory statement with your return (which typically requires that the return be printed and mailed).