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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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Experience:  10 years experience
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I recently sold a partnership that i inherited 25 years ago.

Customer Question

i recently sold a partnership that i inherited 25 years ago. it initially had a value of 90,000.00. I sold it for 136,000.00. what is my tax liability on this transaction?
Submitted: 9 months ago.
Category: Tax
Expert:  Tax-Scholar replied 9 months ago.

Hi James. Welcome to Just Answers. The sale of a partnership interest is a capital transaction reported on Schedule D of your 1040. With the numbers provided your gain would be $46,000. This would be long term capital gain taxed anywhere from 15-20% depending on your circumstance. It could also be subject to the net investment income tax. If the partnership had "hot attest" then some of the gain could be ordinary income. Getting into Hot Asset is a little complex based on your initial question. Let me know if I should continue discussing this.

Keep in mind that you don't pay tax on a per transaction basis. Instead this sale should be reported on your personal return. If you have other capital losses then those could be used to offset this gain.

Inherited property normally gets stepped up to fair market value. I assume some work was done to come up with the 90K when you inherited it?

Customer: replied 9 months ago.
The value of the inherited interest was based on the most recent sale or partnership acquisition prior to my becoming a partner. This was in 1991. I recently sold my interest and that sale price was once again based on the sale of a partnership interest a year ago.
Expert:  Tax-Scholar replied 9 months ago.

That sounds reasonable James.

Customer: replied 9 months ago.
When I talk to my CPA, it should be a simple matter of paying taxes on 46000.00 in additional income for the year?
Expert:  Tax-Scholar replied 9 months ago.

Yes your CPA should no exactly what to do and how to report this. You are required to make estimated tax payments for the year. However you can do this based on the prior year; this is called the safe-harbor method. You should reach out to your CPA and let them know the sale took place and budget for any tax that will be due on April 15.

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