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As I understand, as per line 19, what you are referring to is in recaptured gain --Unrecaptured Section 1250 Gain Worksheet
Correct me if I am wrong.
Line 19 on the K-1 is Distributions.
Yes. I got it.
Generally, this gain is treated as gain from the sale of a capital asset and should be reported on Form 8949 and the Schedule D for your return.
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Yes. I was looking at the form. I am not sure that I understand why this is done this way.
Would this be the case even if it was a cash distribution?
Distributions are reported on your returns, depending upon they are cash, marketable securities it any other form. It stands explained on the link give, however, let me reproduce the relevant content.
If you will look a schedule K-1 (1065) you will find 14 different types of income.
However, if it was actually a distribution of capital you still have to report this to the IRS. It would be reported in box L "Partners Capital Account Analysis" on form 1065 K-1 and box 19 of the same form.
Code A shows the distributions the partnership made to you of cash and certain marketable securities. The marketable securities are included at their fair market value (FMV) on the date of distribution (minus your share of the partnership's gain on the securities distributed to you). If the amount shown as code A exceeds the adjusted basis of your partnership interest immediately before the distribution, the excess is treated as gain from the sale or exchange of your partnership interest. Generally, this gain is treated as gain from the sale of a capital asset and should be reported on Form 8949 and the Schedule D for your return. However, if you receive cash or property in exchange for any part of a partnership interest, the amount of the distribution attributable to your share of the partnership's unrealized receivable or inventory items results in ordinary income (see Regulations section 1.751-1(a) and Sale or Exchange of Partnership Interest, earlier). For details, see Pub. 541.
OK. It is Code A. I will have to determine a date for sale.
Yes.. that is correct.
What about amounts in Section K?
OK.... child on for a while....
Hold on for a while...
Can you please say which box number it is? There are more than one items here
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Also, what if there was an offset to the distribution? There were cash contributions made into the business also. The contributions were larger than the distribution. The contribution is shown in Section L.
The information contained therein is reported to you.
Sorry. Section K does not have line numbers shown.
Its fine..... it is recourse and non recourse liability reported to you by the partnership. It will not be reported on your tax return. You would just attach the K-1 along with your tax return.
So is the case with item L
Item L shows the amount that I contributed to the partnership. Can I put this on the return somewhere as an offset to the distribution received?
No you will not.
You will use K1 data Only to report income on 1040. You will find detailed instructions here.
The cash distributions would increase your share and basis. But you cannot use it on 1040 anywhere.
Is this reported when the business is sold? That doesn't seem fair to show distributions but not contributions.
What about Section 179 and other deductions?
You will use Form 4562 to claim your deduction for depreciation and amortization, make the election under section 179 to expense certain property, and provide information on the business/investment use of automobiles and other listed property.
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