Positive ending capital account and final K-1 box 1 not matching distribution in 19A

Forum|Forum|1 year ago
October 14, 2024
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Hi,

I received a K-1 marked as final and amended and see below numbers. I am little lost on calculating below section since the K-1 is marked as final.

Sale price -- not in the K-1

Sale Expense -- not in the K-1

Partnership Basis -- no supporting document in the K-1 to calculate this as well

Ordinary Gain -- not sure what to enter here

1250 gain -- I see this number as 3735 in Box 9c

Other amounts in the K-1:

Box 1: 8945 - but my distribution including the initial investment is nowhere close to this(initial investment was 2000)

Box 5 interest income: 104

Box 9c: 3735

Box 10: 11078

Box 19 A: 5490

Box 20 A: 104

Box 20 N: 54

Box L numbers:

Opening capital account: -7250

Current year net income(loss): 20321

Withdrawals and distributions: 5490

Ending capital account: 7579

I selected 'This partnership ended in 2023' and 'received amended K-1 for this partnership'

Describe partnership Disposal: Complete Disposition

What type of disposition was this: Sold partnership interest

Entered purchase and sale dates(2016 to 2023)

Can someone please help me how to enter the sale info section and anything else I need to be aware of?

Thanks

Best answer by Rick19744

Some comments to provide assistance:

As a partner in a partnership it is your responsibility to maintain your tax basis in the investment.
Several years ago, the IRS required Part II box L to be maintained on a tax capital basis. In most cases, this should approximate your tax basis; but may not exactly be the same.
Since it appears that you have not maintained your tax basis, we will use the K-1 Part II box L as your tax basis.
You have not indicated whether you have any suspended losses; as you also don't indicate whether you were passive or active in this partnership. My assumption is passive.
If you do have suspended losses, and you mark this K-1 as final in TT, if you have used TT in the past, TT will handle the suspended losses appropriately; they become freed up and will be reflected in your tax return as ordinary losses.
You will also enter the K-1 into TT just as you would any other year.
When TT asks the details on the disposition, just indicate "sold", as effectively that is what occurred.
To determine your tax basis (based on the capital account details provided in Part II box L), you have a tax basis of: $13,071-BOY (7,250) plus current year activity $20,321 (as reflected in box L). I get $20,127 based on the separately noted K-1 line items, but not sufficient information to account for this $194 difference.
So now, when TT asks for your "sale" details you will enter the distribution of $5,490 as your selling price and your tax basis of $13,071 as your cost basis. This will generate a capital loss of $7,581; which is $2 different than your ending tax capital figure reflected on the K-1. These amounts will be reflected on form 8949 and Sch D by TT.

Anonymous_

Employee

No text available

Rick19744Answer

Employee

Some comments to provide assistance:

As a partner in a partnership it is your responsibility to maintain your tax basis in the investment.
Several years ago, the IRS required Part II box L to be maintained on a tax capital basis. In most cases, this should approximate your tax basis; but may not exactly be the same.
Since it appears that you have not maintained your tax basis, we will use the K-1 Part II box L as your tax basis.
You have not indicated whether you have any suspended losses; as you also don't indicate whether you were passive or active in this partnership. My assumption is passive.
If you do have suspended losses, and you mark this K-1 as final in TT, if you have used TT in the past, TT will handle the suspended losses appropriately; they become freed up and will be reflected in your tax return as ordinary losses.
You will also enter the K-1 into TT just as you would any other year.
When TT asks the details on the disposition, just indicate "sold", as effectively that is what occurred.
To determine your tax basis (based on the capital account details provided in Part II box L), you have a tax basis of: $13,071-BOY (7,250) plus current year activity $20,321 (as reflected in box L). I get $20,127 based on the separately noted K-1 line items, but not sufficient information to account for this $194 difference.
So now, when TT asks for your "sale" details you will enter the distribution of $5,490 as your selling price and your tax basis of $13,071 as your cost basis. This will generate a capital loss of $7,581; which is $2 different than your ending tax capital figure reflected on the K-1. These amounts will be reflected on form 8949 and Sch D by TT.

*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.

k1taxes24Author

@Rick19744 thank you very much for your input. This was an active partnership and I had used TT Premier as well in the past few years to enter this K-1 information. I recall seeing negative amount in the past K-1 statements, I was told that I need to pay that as recapture since the partnership is sold for profit in 2023. I understand that I had gotten some benefit in the past but the final distribution is less than taxes paid for the 2023 year. Thanks again for your help.

Rick19744

Employee

Follow-up comments:

You have no recapture since there are no hot assets
The Section 1250 recapture would have come into play if you had an overall capital gain. Since you don't, no impact.
In the past you may have had at-risk limitations, but not sufficient details to address this.
Just enter as reflected in my previous reply and you will be good to go.

*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.