Dissolution of partnership - fixed assets

[rcovelle@comcast.net]

I have a small partnership, selling dollar items. After 3 years, we were losing too much money and decided to dissolve. We sold everything for 10 cents on the dollar. We took a beating.
How do I handle the fixed assets which we sold for 10 cents on the dollar.

We had start up costs of $20K which we amortized for 2 years. We still have $17K on the books.

We have improvements to the store front we rented in the amount of $35K, we depreciated for 2 years, but still have $30K net book value on the books.
These improvements were not sold because they stayed in the store front we rented.

The business was never profitable -the partners lost money each year. the partners basis is now zero.

Can I take a loss on the sale of fixed assets at the net book value - and transfer this loss to the partners via K-1 ??

Can I take a similar loss for the start up costs ??


Thanks for any advice.

BC

[Roland Slugg]

Was real sorry to read about your failed business.

the partners basis is now zero.

It's impossible for the partners' bases to be zero ... unless they somehow managed to get a nonrecourse loan to finance the business. If there are assets on the books ... inventory, equipment, unamortized start-up costs ... then there have to be "credits" somewhere, and those credits can only be represented by either, (1) loans, or (2) partner capital accounts. The total of (1) and (2) equals the partners' bases, unless the loan is a nonrecourse loan, which is not very likely.

If there is basis, then everything is deductible in various ways. Inventory = ordinary loss as COGS, equipment = §1231 loss (reportable on F-4797), the startup costs and storefront assets being left behind will yield either §1231 losses or ordinary business deductions as abandonment losses. Everything should be reported on the p'ship's final F-1065, and the losses will flow to each partner via Schedules K-1.

To make sure everything is accounted for properly and reported on the tax returns correctly you may wish to hire a qualified person to take on the task of wrapping everything up. Most CPAs and EAs would be able to do this, but the bookkeeping and accounting might be handled by a good, experienced bookkeeper.