Taxpayer received a final K1 from a partnership that he is 50% owner. Line 20Q reads "Distribution in Excess of Partner Basis $42,888". I assume this is just picked up as a capital gain on Schedule D. Correct?
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Basis
Have you been keeping the basis? See if your records agree. This would probably be his sale price and his basis would be the cost.JG -
They provided us with a calcualtion of basis... This was labled as "distributions in excess of basis". This "plug" brought the basis to zero. I assume I would simply put on Schedule D as the selling price with no basis.
Any other thoughts?Comment
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Originally posted by Unregistered
It depends.
You did not provide enough facts for us to just say, put it on a Schedule D.
If cash is distributed to a partner in excess of basis, it is taxable as a capital gain.
If property is distributed to a partner that has a FMV in excess of basis, it is not taxable. The partner’s basis in the property received equals the partner’s basis in the partnership just prior to the distribution, and the new basis in the partnership is zero. If and when the partner sells the property received, that may be taxable as a capital gain or ordinary income, depending on a whole bunch of other factors.
If unrealized receivables and inventory items are distributed to a partner in excess of basis, a portion of the gain may be taxable as ordinary income.
If collectibles subject to the 28% rate are distributed to a partner in excess of basis, a portion of the gain may be taxable at the 28% rate.
If section 1250 unrecaptured gain property is distributed to a partner in excess of basis, a portion of the gain may be taxable at the 25% rate.
It depends.Comment
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I wouldn't trust the calculation. If the plug is exactly the amount to zero the basis it is most likely just that, a plug figure..Originally posted by UnregisteredComment
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