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Anne
Anne, Master Tax Preparer
Category: Tax
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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A partnership gets a K1 from a partnership with LT capital

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A partnership gets a K1 from a partnership with LT capital gain income, Box 9a. The K1 partner instructions say to put this on Line 12 of Schedule D. That would be for a 1040, Line 13 on a 1065. Is this the only way, or can you put it on a Form 8949 to get the second partnership's costs involved, reducing the gain?

Anne :

Hi

Anne :

Thank you for your question

Anne :

You're correct. You will put this on form 8949 as a capital gain carryover

Customer:

and I can use the cost column to further reduce the gain, right?

Anne :

correct.....but give me just a second here, ok?

Anne :

I wanted to check 1 thing

Customer:

ok

Anne :

Ok....we both have the theory correct...........but you actually don't use Form 8949

Anne :

You will go directly to Sch D

Anne :

If its a short term loss carryover you enter it on line 5 of Sch D

Anne :

and if its a long term you put it on line 12

Anne :

As soon as I agreed that you would enter these on 8949, I remembered that they need to go directly to Sch D

Anne :

One of the few times you don't need to use Form 8949

Customer:

Those lines pertain to like kind exchanges. I'm thinking line 10, and reduce my gain right there. This is a 1065 schedule D we're talking about.

Anne :

Here's line:

Anne :

line 12 from Sch D

Anne :

Net long-term gain or (loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K-1

Customer:

That's Line 12 on a 1040 schedule D. line 13 on a 1065 schedule D. But that doesn't let me reduce the gain by the second partnership's basis. It wouldn't match the K1. There are some that believe this is a basis issue, but if you just increased basis every time you sold part of your land, you'd end up with a huge basis and nothing left to sell when you sold your P'ship interest. That seems nuts to me.

Anne :

give me a second to read & digest this, ok?

Customer:

yes

Anne :

What letter code is next to the line 13 of the K1

Customer:

Line 9a on the K1.

Anne :

ok...........where do you see "like kind exchange"

Anne :

On the K1?

Anne :

the Sch D?

Anne :

I'm just trying to get on the same page with you

Customer:

Form 8824 is like kind exchange, lines 5 and 12 on a 1065 schedule D. Partner instructions say to enter the amount from a 1065 K1, line 9a on line 12, schedule D-but that is a D for a 1040. The same as Line 13 on a schedule D for a 1065. But that is just a dollar amt. I would match that with line 9a of the k1. But I would rather enter it on an 8949 or straight on a D line 10, and put in cost basis to reduce the gain. Makes sense to me, but I'm not the IRS.

Customer:

Did my reply not go?

Anne :

must not have......the chat rooms often have little "glitches" but I have it now...........so let me read it now

Anne :

Ok, I'm with you.........but I want to do some quick checking before I answer this. Can you hang a minute?

Customer:

yea

Anne :

Ok..........I'm with you now

Anne :

(haven't had first cup of coffee....so I was a little slow this morning, forgive me)

Anne :

You are correct

Customer:

No problem?

Anne :

None that I can find

Anne :

You will have to have a blueprint for each K1 for the IRS

Anne :

so that they can follow you

Customer:

Maybe I just beat a dead horse to death.

Anne :

I'm thinking it would have been combined on the Sch E anyway

Customer:

Yea, ultimately, if ended up on a 1040. It will end up on a 1120. I'm just a little paranoid about the IRS.

Customer:

Thanks.

Anne :

You're most welcome

Anne :

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