Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

If a partner in a partnership is forced to leave the ...

Customer Question
If a partner in a...
If a partner in a partnership is forced to leave the partnership due to his inabilty to make capital calls, is it correct that he has a capital loss to the extent of his basis? If so, how is the partnership or the remaining partners taxed for "inheriting" the partners basis?
Submitted: 9 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 3 minutes by:
7/3/2008
Tax Professional: RD, Certified Public Accountant (CPA) replied 9 years ago
RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8,784
Experience: CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
Verified
Is the partner leaving the partnership getting some amount towards his interest? How much is his basis in the partnership?
Ask Your Own Tax Question
Customer reply replied 9 years ago

He is not receiving any money. It was a real property purchase that now has very questionable value with the decline in property values. He is insolvent so him walking on the partnership makes sense. He has about $150,000 of basis not including the $500,000(his portion) of recourse financing on the property. All the mortgage documents were rewritten without him and the remaining partners picked up his share.

Tax Professional: RD, Certified Public Accountant (CPA) replied 9 years ago

You need to calculate the value of the partnership and consider this as a purchase of his share by the remaining partners if that is what is intended.

Since the value of the partnership may be lower than the investment the partners have in the partnership, the value of that partner's share may be zero or even negative. Since the partner leaving the partnership will not get anything in return, he will write off his basis in the partnership as a capital loss.

The other partners will not be subject to any tax as a result of the purchase of the partnership interest.

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

 

RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8,784
Experience: CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
Verified
RD and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 9 years ago

Thank you for your help and I would like to double the suggested fee if you could clarify your thoughts.

Are you saying we debit the withdrawing partner's capital account $150K and credit the remaining partner's account $150K? If there is a loss by the exiting partner is there not a gain (or a reduction in basis) to be recognized at some point by somebody.

Tax Professional: RD, Certified Public Accountant (CPA) replied 9 years ago

This is a complicated issue. If the partnership has made a sec 754 election than you may have to adjust the inside basis to outside basis. Attached is a link to explain what it really means.

http://www.nysscpa.org/cpajournal/2005/205/essentials/p50.htm

 

However, if the partnership has not made this election(which is also good in this case) - Your inside basis in the partnership will be your original basis plus 50% of the outgoing partner;s basis and same will apply to the other partner. Hence, you will make the entry as you mentioned.

Note that if you make this deal outside of the partnership - such as you both are buying out the partner - no gain or loss will be currently recognized in the partnership unless there is a section 754 election in place. Since the assets in the partnership have depreciated in value, it is not a good idea to make such election too.

You may want to (and I would also suggest you to) engage a professional to help you evaluate the tax consequences with detailed information on the partnership taxes, assets etc.

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

 

 

RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8,784
Experience: CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
Verified
RD and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 9 years ago

Is there someway I can request you in the future? (if you wish, of course) I greatly appreciate your responses.

Thanks

 

Tax Professional: RD, Certified Public Accountant (CPA) replied 9 years ago

You can either request me or mention "For RD Only" on the post.

I would be glad to help you with any other questions you may have.

 

Ask Your Own Tax Question
Ask RD Your Own Question
RD
RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8,784
8,784 Satisfied Customers
Experience: CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..

RD is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I am a Card holder planning to sell foreign assets (property
Hi....I am a Green Card holder planning to sell foreign assets (property in India)...I am aware that I will have to pay the higher of the 2 tax liabilities (either Indian or American)..I expect my US … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
Can I report rental income in my tax return on a property
Can I report rental income in my tax return on a property thar is owned by my father? He does not live in the US is not a US citizen and can sign a document to allow me to receive the rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
For a ny state partnership tax return, if you file an
For a ny state partnership tax return, if you file an extension but don't pay anything and then end up owing a lot. Do they still recognize the extension or do they charge a failure to pay penalty (fo… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can you write off mortgage interest on a vacation home the
can you write off mortgage interest on a vacation home the home price 54000.00 … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I have a question about NC capital loss taxes, I have about
I have about $40k in stock losses in 2016. My federal return limits the capital loss to $3k and I have to carry forward the other $37k. I'm wondering if NC has the same limitation or if I'm able to claim a higher portion of those capital losses? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Can I write off mileage from my tractor on a schedule F? And
Can I write off mileage from my tractor on a schedule F? And is it possible to claim 179 deduction on it?… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I am 50% partner in an LLC, taxed as partnership (form
I am 50% partner in an LLC, taxed as partnership (form 1065). The other 50% partner is my friend. This LLC's only assets were 2 single family houses, which we rented out. In 2016 we have sold both of … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I want to monetize a 111k capital loss that I have from the
I want to monetize a 111k capital loss that I have from the sale of my Fathers house which I inherited after he died … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
Can a partnership return have a negative bank balance?
Can a partnership return have a negative bank balance? … read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Trying to understand if I can write off the purchase of a
Trying to understand if I can write off the purchase of a computer … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
A Form 1065 partnership return is being prepared for a
A Form 1065 partnership return is being prepared for a partnership whose General Partner is a single member LLC. In the Analysis of Net Income (Loss) section at the top of page 5, is the LLC's portion… read more
taxmanrog
taxmanrog
Master\u0027s Degree
697 satisfied customers
For non tax reasons, i want to transfer assets, non property
For non tax reasons, i want to transfer assets, non property assets, non 1231, 1245 assets, that are currently in an S corporation to a new S corporation. … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I am preparing a partnership tax return for 2016. The
I am preparing a partnership tax return for 2016. The partnership holds commercial rental property. one of the partners, 50%owner, passed away in April 2016 and left his interest to his spouse. i woul… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
A Nevada partnership (LLC form in Nevada) own property in
A Nevada partnership (LLC form in Nevada) own property in Nevada. in 2016, the partnership hire a manager in California to manage Nevada rental property (this manager is show on the Nevada Secretary s… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Can franking credit on an Australian income tax return be
Can franking credit on an Australian income tax return be used on Form 1116 as tax paid on the franked distributions? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Can I write off (I would think Schedule C) my $2400 tax prep
Can I write off (I would think Schedule C) my $2400 tax prep fee. I am a "real estate professional" "active participation" and have about 30 rental properties, I own as a sole proprietor w/o dba or co… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
Tax question regarding mba write-off as educational
tax question regarding mba write-off as educational expenses. Im an engineer looking to move to management track within current company. Company is reimbursing me for my tuition, but adding it onto my… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Tax Rules: If I come to a (defendable) decision to write off
Tax Rules: If I come to a (defendable) decision to write off an amount I loaned a company, what kinds of income can that shield? What are the limitations?Also, I was told by someone that I have to wri… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x