Partnership sold 1 of its properties

[mhcpa1964]

Hi all,

Husband and wife LLC owns multiple rental units and files partnership 1065. They sold one property at a gain of $61k. Form 4797 was used and the gain is listed on K1 line 10 as Net Section 1231 gain.

I've included the Net Section 1231 gain on the 1040 and it shows up on Schedule D as LT gain. Their taxable income is $86,334 and the income tax calculated is $2,128. I'm using ProSeries. The tax is all income, no capital gains tax.

I think the tax should be higher. Am I missing a form on the 1040? Is there a checkbox I've overlooked? Their TI is $86k which puts them in the 15% capital gains rate MFJ. Could this be the source of my confusion? The item did not produce a Form 8949, should there be one? (No, there shouldn't be 8949.)


I know I haven't listed enough information and I'm rambling, but does anybody have suggestions or ideas.

[TaxGuyBill]

Their TI is $86k which puts them in the 15% capital gains rate MFJ. .

That puts about $5000 in the 15% Capital Gain bracket. The other $56,000-ish of the gain is in the 0% Capital Gain bracket.

Does that make the numbers make more sense?

[mhcpa1964]

Thanks for chiming in TGB. I went back and studied the Qual Div/Capital Gains worksheet and got a better grasp of the tax outcome. Yes, it made much more sense, especially after stepping away from it for a day.