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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28396
Experience:  Taxes, Immigration, Labor Relations
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My husband had a capital gain of $40,000 from his father's

Customer Question

My husband had a capital gain of $40,000 from his father's LLP but he never received that money. We filed with H&R Block and paid taxes on that money. His sister, who is the managing partner, said it was from a piece of property sold 2015. So the property sold for &165,000, split 3 ways =$55,000 each. She gave $15,000 to each person and said she put each person's $40,000 back into the LLP. IS THIS LEGAL? I'M NOT OK WITH REPORTING INCOME WE DID NOT RECEIVE!!!!! What should we do?.....according to my husband's father's will, if he makes waves, he gets kicked out. He is totally disabled & depends on his usually small inheritance. ?
Submitted: 10 months ago.
Category: Tax
Expert:  Lev replied 10 months ago.
Unfortunately - there is not much we may do...All partners are liable for his / her share of partnership income.The partnership itself doesn't pay income tax.Instead - all taxable income is divided between partners ans each partner includes that income into his /her tax return..How the money are used - that is between partners.So if you disagree - you would need to communicate with other partners and negotiate.If you would not be able to negotiate - your only option - to sue other partners.
Customer: replied 10 months ago.
My husband is not responsible for any partnership income. His 2 sisters are the managing partners. He has no control over any of it. If our K1 says we got the $40,000, then he should get it. That's what H&R Block told us and he has 50 years experience. Never heard of paying taxes on money you don't receive.
Expert:  Lev replied 10 months ago.
The K1 actually provides more information that for instance W2 form/K1 reports BOTH - the share of the partnership income AND the distribution.The distribution itself is NOT taxable,But his share of the partnership income is taxable..Partners are responsible to pay taxes on income received by the partnership - that is how the partnership works.See here partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.Please pay attention - that is REGARDLESS if income is distributed or not.But the distribution itself is NOT taxable.