sale of PTP

[Bill Tubbs]

About 20 years ago client bought into a PTP for $20,000. Each year it has had a Rental Real Estate Loss on K-1 (Form 1065), line 2). The fun part is this past year the PTP dissolved (he hasn't received any distribution in the past 5 years and received nothing when it dissolved), and now I'm trying to figure out how to report it.

I have only worked with this client the past 6 years; when he first came to me he had Form 8582 (Passive Activity Loss Limitation) with $27,760 on it because of this PTP. Since then the Loss on K-1, Line 2 has increased this PAL up to $28,634. I am betting that the $20,000 initial investment is part of this $28,634 on the 8582. It seems to me that at least the $20,000 purchase price of the PTP that he lost should be a Long-Term Capital Loss. Then what about the $8,634 of Rental Real Estate Loss that has accumulated over the years?

Anyone have any insight on PTPs, please!

Bill

[Burke]

I hate these things. The only way to really calculate it accurately is to have each and every K-1 and each and every tax return since he bought it to look at it. Unless you happen to have done the guy's returns since the beginning. I had so many of these a while back, I made up a spreadsheet to update every year. The 8582 should not have the original purchase price included in the suspended loss figure. The K-1 would have started out with the purchase price in the basis information, adding income, subtracting losses, but the PTP has no way of knowing how much, if any, loss was actually taken each year so you cannot use that.

[Bill Tubbs]

Form 8582

Actually, according to the instructions for Form 8582, it seems this form should NOT be filled in for PTPs. And, now I'm doubting if I reported each year correctly. Oh well, the numbers the past 5 years are not significant to worry about...

Thanks for the confirmation that the original purchase price should not be in the amount of suspended loss that's being carried forward. I am aware that his cost basis in the PTP would have been reduced by any distributions that he received, but he says that he never got a distribution. So, I should be good-to-go with putting a $20,000 on Sch D, and then claiming the suspended loss of $8-9000 on Sch E with a "EDPA" notation.

Bill