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jgordosea
jgordosea, Enrolled Agent
Category: Tax
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Experience:  I've prepared all types of taxes since 1987.
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Hi John, I have another question related to my Trusts sale

Resolved Question:

Hi John, I have another question related to my Trust's sale of the real estate partnership interest. I received your answer re recording the stepped up basis on Sched D.

When the partnership interest is sold back to the partnership (they will distribute it to the remaining partneres), do I have to report any accumulated depreciation, or does that stay behind in the partnership. If so, would it be shown on the final K-1 I receive from the partnership? This apartment complex is about 36 years old so the buildings are almost fully appreciated and my share would be a BIG number.

I would imagine that the accumulated depreciation would just be maintained in the partership and the day of reckoning would occur when the partnership finally sells the property.
Submitted: 5 years ago.
Category: Tax
Expert:  jgordosea replied 5 years ago.

Hello again,

 

You are correct that when the partnership is buying the interest of a partner generally there will not be any allocation of the depreciation previously claimed. There are some exceptions (as is almost always the case with tax treatment) such as some cases when the partner had contributed the property to the partnership; but that does not seem to apply in your case.

 

When the partnership disposes of the depreciated property there often will be pass through of the character of the sale to each of the partners at the time of disposition of the property so timing of events can be important for determining what is or is not a part of the final K-1 for the partner that liquidates their interest.

 

I hope this helps to confirm that you are correct in your idea of how the sale of the property is an item of partnership income and is not part of the liquidation of a partnership interest.

 

Best regards.

 

 

 

jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3005
Experience: I've prepared all types of taxes since 1987.
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