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Old 04-07-2016, 03:40 PM
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Final K-1 Partnership basis

Sold my interest in partnership for $100 in 2015. Getting different answers from "pros" on liability (some say cap gains others say ordinary income others say dont know). Any help would be appreciated!!

K1:
From Partner Basis Worksheet:
Beg Adj Basis: 910,000
Share of Liab: 1,648,000
Unrealized Receivables (no payment received) 230,000

Beg Capital Account -2,035,000
Cap contributed during year 2,104,382
Current Year decrease -68,000

From my balancing of past k-1s income, losses, contributions:
Ending tax capital account -739,000 (yes big losses in earlier years)



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Old 04-08-2016, 05:45 PM
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Join Date: Oct 2010
Posts: 5,233
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Sold my interest in partnership for $100 in 2015. Getting different answers from "pros" on liability (some say cap gains others say ordinary income others say dont know). Any help would be appreciated!!=====>Basically it depends; it can be LTCG(LTCL) or ordinary gain(loss). The transferred
interest is treated like corporate stock. Thus, it is primarily considered to be a separate
intangible asset, rather than an undivided tenancy-in-common interest in the partnership
assetsHowever, there are several exceptions to this situation. As is the case on any asset's sale, the amount of your gain or loss on the
transfer of your interest is
the amount realized by you for the transfer of yourinterest which is in excess of, or less than, your adjusted basis in your ?outside basis, not inside basis.

K1:
From Partner Basis Worksheet:
Beg Adj Basis: 910,000
Share of Liab: 1,648,000
Unrealized Receivables (no payment received) 230,000=====>I am not sure what your situation is however just for reference, aslongas any or if contributed property is subject to a debt or if your liabilities are assumed by the partnership, the basis of your interest is reduced (but not below zero) by the liability assumed by the other partners of the PS; your basis in the PS interest includes your share of the PS liability only if, and to the extent that, the liability creates or increases the PS's basis in any of its assets; Gives rise to a current deduction to the PS, or is a nondeductible, noncapital expense of the PS. unrealized receivables applies only to amounts that will ultimately be realized and recognized as ordinary income. If the PS uses the cash method of accounting, trade receivables from services or sales are unrealized receivables. If the partnership uses the accrual method, they are not. Unrealized receivables include receivables from the sales of ordinary income property and rights to payments for services. For some purposes, unrealized receivables also include ordinary recapture income that would arise if the PS sold its depreciable assets. Installment gains are unrealized receivables if the gain will be taxed as ordinary income when realized.


Beg Capital Account -2,035,000
Cap contributed during year 2,104,382
Current Year decrease -68,000======> Partnership and pass-through taxation is very a complicated and complex part of the tax code you have taken more in distributions than is in your capital account;so your final capital account on the K-1 is negative.

When your PS is liquidated, you may have credit balances in your capital account so called
no capital deficiency. Or you may have a debit balance in the capital account termed
a capital deficiency. you
leaving the ps with a negative capital account has income to the extent of the negativity, which you need to report on 1040 Line 21; A negative capital balance indicates there was no remaining basis in the outside basis and any distribution beyond $0 would be income to you and not a distribution of your investment: treated as capital gain or possibly a loss was allocated to your account and will have to be absorbed by the remaining partners upon liquidation of the PS. It could also mean that you will owe those partners for the negative basis that they will have to absorb on your behalf. You will need to review your PS agreement to determine how to handle this. Most agreements include a provision requiring partners with negative capital accounts to make sufficient contributions to zero them out on liquidation.



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