Disposition of partnership interest

[RightOn]

Client was a passive part owner of a partnership. All the assets of the partnership were sold and the partnership was liquidated in 2014.

I have a discussion of my colleague. He thinks the client only needs to report the final K-1 because all the information including the sale of the partnership should be there.

I do not agree though. In addition to reporting the final K-1, I think the client should also report the disposition of his partnership interest on Schedule D based on the sale price of the assets and his tax basis.

Who is right?

[Roberts]

I think it would depend. A partnership sale could generate a capital gain / loss or an ordinary gain / loss.

[Roland Slugg]

Your colleague is right. Since all the assets were sold by the p'ship, it will figure the gain or loss on everything and report your client's shares of everything, in each category, on his year-end K-1 form.

If your client had sold his p'ship interest to a third party himself, then he would report gain or loss on Schedule D, since a p'ship interest is a capital asset.