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I am 50% partner in an LLC, taxed as partnership (form

1065). The other 50% partner...
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 those rentals and dissolved the LLC. On which form do we report the gain on the sale of these rentals on the partnership return? Is it a section 1231 gain?
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Answered in 24 minutes by:
10/10/2017
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,978
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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The Partnership reports the sale by filing Form 4797, Form 8825 and Form 1065. The K1s of each partner will reflect the sale and any gain form these events.

The profit or loss from rental activities goes through Form 8825.

Each Member’s portion of rental activity profit and loss flows from Form 8825 to Line 2 of Schedule K-1 of Form 1065.

The sale gets reported on Form 4797, part 1.

The Member’s losses flow from Form 4797 to Line 10 of Schedule K-1 of Form 1065.

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You may (and I suggest) you use a tax preparation professional for this. It is complicated.

A positive 5 star rating is appreciated so I am credited for responding.

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Customer reply replied 2 months ago
we are using a tax professional. He reported all gains on line 10 of K-1 (section 1231 gain). I wasn't sure it was right because I thought section 1231 property is something you use in business like a factory building. I thought rental real estate is not section 1231. So was he right to put the gain on line 10 of K-1?

Yes he was. I even stated line 10 in my response

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Section 1231 is the section of the Internal Revenue Code that deals with the tax treatment of gains and losses on the sale or exchange of real or depreciable property used in a trade or business and held over one year. The rental was used in a business (partnership) and it was depreciable. It does not have to be a non residential.

Did that clarify?

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,978
Experience: 15years with H & R Block. Divisional leader, Instructor
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Customer reply replied 2 months ago
You mentioned only loss to line 10 earlier. Sorry for being so difficult, I just wanted to make sure. Thank you for detailed answer. It's all clear now.

You are most welcome

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Robin D.
Robin D.
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Category: Tax
Satisfied Customers: 15,978
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Experience: 15years with H & R Block. Divisional leader, Instructor

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