Partnership sold real estate with slightly more than enough cash to pay off its debt. Partnership then terminated.
Taxpayer/partner's final K-1 reports net section 1231 gain of $100. This gain arose mainly from the allocation to the partner of a deferred gain (arising from a 1031 exchange). (A portion of the gain is section 1250 gain, so also adding that into outside basis would be double counting).
Partner's share of debt paid off was $12.
$10 net rental loss (box 2).
$3 of cash was distributed to the partner and reported in Box 19. No other distributions are on the final K-1.
My main concerns are
A) is the 1231 gain is added into the outside basis?
B) will the final outside basis then be written off as a capital loss, (thereby offsetting to offset the 1231 gain reported on the final K-1)? If not, where have I gone off-track?
Outside basis calculation:
Note: Beginning outside basis is not the beginning capital account on the K-1.
Outside basis - year end beginning of year: $ 50
Net rental income (loss): ($ 10)
Cash Distribution: ($ 3)
Debt relieved: ($ 12)
1231 Gain: $ 100
Outside basis: $ 125
Taxpayer/partner's final K-1 reports net section 1231 gain of $100. This gain arose mainly from the allocation to the partner of a deferred gain (arising from a 1031 exchange). (A portion of the gain is section 1250 gain, so also adding that into outside basis would be double counting).
Partner's share of debt paid off was $12.
$10 net rental loss (box 2).
$3 of cash was distributed to the partner and reported in Box 19. No other distributions are on the final K-1.
My main concerns are
A) is the 1231 gain is added into the outside basis?
B) will the final outside basis then be written off as a capital loss, (thereby offsetting to offset the 1231 gain reported on the final K-1)? If not, where have I gone off-track?
Outside basis calculation:
Note: Beginning outside basis is not the beginning capital account on the K-1.
Outside basis - year end beginning of year: $ 50
Net rental income (loss): ($ 10)
Cash Distribution: ($ 3)
Debt relieved: ($ 12)
1231 Gain: $ 100
Outside basis: $ 125
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