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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29558
Experience:  Taxes, Immigration, Labor Relations
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I was part of a real estate partnership. The property was

Customer Question

I was part of a real estate partnership. The property was foreclosed upon and a deficiency judgment awarded against the individuals. I settled with the bank to resolve the deficiency. The settlement was in the form of a loan with payment schedule. How do I properly deduct the settlement payments?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
Several issues...1.When the property was foreclosed and disposed - that transaction is reported as the sale at the fair market value.So - the partnership reported the sale transaction - most likely realized a loss - and that loss was passed to partners on final K1 and and should be reported on your individual tax return..2.I assume the partnership was dissolved. In this situation if you as a partner assumed a debt of the partnership - that amount is added to your basis of the partnership interest. So when you reported the disposition of the partnership interest - using that adjusted basis - you would likely realized a loss on that disposition which is reported on your tax return.3.Regarding the note - as the principal was added to the basis of your partnership interest - you would not deduct a part of the payment apportioned to the principal.However interest you pay on that note is deducted as investment interest - on schedule A. .Questions? Be sure to ask.
Expert:  Lev replied 1 year ago.
3.Regarding the note - as the principal was added to the basis of your partnership interest - you would not deduct a part of the payment apportioned to the principal.However interest you pay on that note is deducted as investment interest - on schedule A...I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all tax related issues.