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Old 07-25-2016, 09:13 PM
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Selling of partnership interest and no K-1

Hello - my new client was part of a partnership (passive interest) and has very limited information, no 1099-B, no recent K-1s, and no current basis information. Bottom-line info he has is purchase price and date and selling price and date (long-term gain). There is no unrealized receivables or inventory. Not sure about partnership liabilities but he doesn't think so (very disorganized partnership, I'm told). Since that's the best info I can obtain, I will have to go with it, but I'm not sure where to input the sale/gain on the tax return. I believe I input it on 8949 with Box F checked, but please confirm. I'm also not sure if I should file form 8082 stating no K-1 received, since the instructions say to not file that form if all owners are individuals and there are less than 10. I'm not sure that is the case but I suspect it is. Any confirmations/clarifications would be extremely helpful and appreciated!!

Jane



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Old 07-27-2016, 10:27 PM
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Hello - my new client was part of a partnership (passive interest) and has very limited information, no 1099-B, no recent K-1s, and no current basis information. ==========>>>> The best path forward would be to contact the partnership and ask for a copy of K-1s of 1120S or 1099b or etc.because the K-1 were also submitted to the IRS ,you may get that information from the IRS.
You may verify what information was submitted to the IRS by ordering your tax account transcript and Record of Account - you need to use form 4506T;on the form 4506T - check the box 6(b) and 6(c).

just for reference, Each partner?s basis in a partnership is derived from the cash, services and property contributed when the partnership was formed. If any of the property has been depreciated before it is contributed, the book value becomes the basis for that property. Book value is the original price minus the depreciation. A partner may contribute services in exchange for a partnership interest. The partnership must assign a value to those services when the partnership is formed. Over the life of the business, if the limited partner makes withdrawals from the company in excess of the amount in his capital account, that partner has a negative capital account. This does not affect the partner's basis In the event he has withdrawn assets over the life of the company, those withdrawals are deducted from the capital account. However, his original basis in the partnership is not reduced. That is, the partner still receives income in proportion to her original basis in the company, even though the capital account is negative. If the limited partner has probably had distributions in excess of basis in prior years, or the partnership has operated at a loss at one time or another. Then the distributions in excess of basis represent taxable income to the partner and should be reflected as such either on the K-1 or the partner's Basis Statement.






Bottom-line info he has is purchase price and date and selling price and date (long-term gain). There is no unrealized receivables or inventory. Not sure about partnership liabilities but he doesn't think so (very disorganized partnership, I'm told). ====>>I guess UNLESS he Keeps Track of Basis in the limited Partnership Interest, hard to accurately find out what his outside or inside basses in the partnership. The fundamental purpose of outside basis is to account for his cost basis in his partnership interest. In other words, his outside basis represents his after-tax investment in the partnership. Outside basis determines how much he may withdraw or deduct from a partnership for tax purposes without recognizing additional gain or without being limited on the allowable flow-through of partnership losses so without the accurate info on his outside basis in the partnership, his gain/ loss is inaccurate.


Since that's the best info I can obtain, I will have to go with it, but I'm not sure where to input the sale/gain on the tax return.====as said unless the conditions are met as mentioned above, it is inaccurate result.

I believe I input it on 8949 with Box F checked, but please confirm.======>> Computing tax obligations when a partner liquidates his partnership interest can be simple or extremely complex. The tax liability will depend on the structure of the partnership agreement and the history of transactions that have occurred with the partnersbefore doing this, guess you need accurate info on the partner?s inside/outside bases or cap acct of the partnership for more accurate gain/loss;once he knows yhis basis, he compares this to the sale/disposition proceeds. If he has basis left over, then he has a capital loss. If this goes negative, then he has a capital gain to the extent of the negative figure.The final complicating issue is some of the gain / loss could be ordinary asyou know. You will need to determine this. The ordinary component will come from what the IRS calls "hot assets" and most likely would be depreciation recapture (this is due to the fact that with a sale of a partnership interest you look through to the underlying assets as being sold). So the sale actually has no effect on the completion of Form 1065 unless the partnership is being liquidated; rather, it is reported through a series of adjustments made on the individual partner's Schedule K-1s The sale of his interest will be reported on Sch DWhen sales and exchanges of capital assets, they also appear on Form 8949 and are moved to Sch D ; sale or other disposition of an interest in a partnership may result in ordinary income, collectibles gain (28% rate gain), or unrecaptured section 1250 gain reported also on SCh D part 2, I guess. The sale of the depreciable assets is reported on IRS Form 4797, assuming the partnership did not elect to expense their cost under Internal Revenue Code Section 179. You need to use Part III of Form 4797 to report the sale of each asset and the related "Section 1245" ordinary income recapture if the LLC held the asset for more than one year. Use Part II for assets held less than 1 year.
If you used the Section 179 expense election on any asset, that asset sale is reported directly on each partner/member's individual income tax return. Use the same form, IRS Form 4797 to report the sale of Section 179 property.

Read more here: Personal Finance: Ask the Experts: How do I report sale of business assets?


I'm also not sure if I should file form 8082 stating no K-1 received, since the instructions say to not file that form if all owners are individuals and there are less than 10. I'm not sure that is the case but I suspect it is. ===========>>aslongas the limited partner disagrees with the treatment of some items stated on the K-1. Then, the client needs to file Form 8082 ,Inconsistent Treatment, with his timely filed tax return. Then the partnership also needs to amend its returns and issue amended K-1s and 1065s to all the partners. Again when the client disagrees with the new treatment of the items for the same year but there is no change in the client's tax liability or the way he would report the items. By filing from 8802; what I mean is that you need to use IRS Form 8082 to report an incorrectly issued Sch K1 Of 1065. So it is up to you if you thin k that you need to correct info n his SCh k1s then yes go ahead and file form 8082 and amend the 1065S.as you said, do NOT file the form if the partnership had no more than 10 partners at any one time during the tax year (fyi husbands, wives and their respective estates are treated as one partner);



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