Distribution From Partnership

[Taxman]

If a partnership consisting of two 50% partners distributes a piece of land to the partners 50 - 50 into the partners individual names and the 2 individuals incur expenses to maintain the land and later sell the land, would they report the sale/expenses on their 1040 Sch C or Sch E or file as a new partnership?

[Corduroy Frog]

Neither One

Sale of land owned by individuals is reportable as a Schedule D transaction. Each owner reports half the profit/loss.

From your post, the land was transferred OUT of the partnership. With respect to the land, ownership exists but an operation does not exist. The land by itself is not a partnership just because incidental expenses such as property taxes, liability insurance, and selling expenses may have been incurred.

[Taxman]

Would the incidental expenses such as property taxes, liability insurance while carrying the property until it is sold be a Sch C expense or capitalize until the land is sold?

[dsi]

Taxman, once the land is "distributed" to the partners, unless there is more to the story to consider then it sounds like they now have "investment" property?

[lbbwest]

As always the answer is it depends.

Taxman keeps referring to a Schedule C. Was the original partnership in the business of dealing real estate? If so then the distribution was of "inventory" as opposed to a capital asset. There is not enough information given to answer this question correctly.

[Taxman]

Partnership originally held 3 lots of land and sold 2 of the lots. I assume the lots of land would be treated as inventory and upon a distribution from the partnership to an indivual partner it would be considered inventory in the partners hands. If the partner then in turned incurred expenses would he be able to expense those items or would they be capitalized?