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Author: venny Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: K1 Reporting Date: 4/4/2005 1:38 PM
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During 2004 I liquidated a holding in a publicly held limited partnership (very small holdings).

The general partner supplied the income tax information (K1 - form 1065) to assist in preparing the the 2004 tax return. The general partner does not report the amount paid to buy back the units held by me. The forms do show that the ending capital account is "0". I may add that this was not a profitable investment held for 10 years.

My question - where do I report the amount received for the units bought back by the General Partner who closed the partnership.

Thanks.
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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 78290 of 121219
Subject: Re: K1 Reporting Date: 4/4/2005 2:28 PM
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My question - where do I report the amount received for the units bought back by the General Partner who closed the partnership.

That's a sale of a capital asset, so it would go on schedule D.

--Peter

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Author: venny Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 78307 of 121219
Subject: Re: K1 Reporting Date: 4/5/2005 10:14 AM
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Thanks for reply. I have similar thoughts but if my recall correct past limited partnerships reported with the K1 the return of capital. I repeat I am not sure of regulations but when a LP is liquidated the money received for the units (liquidation funds) does not necessarily represent a purchase price as it may include some other charges for depreciation, etc. This LP called a tax shelter did not do any sheltering for me and now I may even incur a small capital gain. This LP gave no instructions how to handle the amount of money given to purchase the units held & thus liquidate the partnership.

To be absolutely safe reporting the amount given on schedule D would be proper even though it will incur a tax payment. Oh well a capital gain better than a loss.

Thanks again for your observation.

venny

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 78308 of 121219
Subject: Re: K1 Reporting Date: 4/5/2005 10:40 AM
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Thanks for reply. I have similar thoughts but if my recall correct past limited partnerships reported with the K1 the return of capital. I repeat I am not sure of regulations but when a LP is liquidated the money received for the units (liquidation funds) does not necessarily represent a purchase price as it may include some other charges for depreciation, etc. This LP called a tax shelter did not do any sheltering for me and now I may even incur a small capital gain. This LP gave no instructions how to handle the amount of money given to purchase the units held & thus liquidate the partnership.

To be absolutely safe reporting the amount given on schedule D would be proper even though it will incur a tax payment. Oh well a capital gain better than a loss.

Thanks again for your observation.


The cash you receive upon liquidation is reported on Schedule D, but you can't know whether it's a gain or a loss until you know your cost basis and include that on Schedule D as well. Your cost basis is your initial purchase cost plus/minus all of the income/expense items and cash distributions reported over the years you've owned the LP.

Ira


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Author: venny Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 78309 of 121219
Subject: Re: K1 Reporting Date: 4/5/2005 11:10 AM
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Many thanks Irasmilo. Another observation please. Am I correct in assuming the General Partner of the LP should furnish the information for to arrive at the cost basis (income/expense items & cash contributions)?

I certainly do not have this information. The safest route if the LP does not provide this information would then be to use the original cost of the LP units correct?

Thanks venny

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 78311 of 121219
Subject: Re: K1 Reporting Date: 4/5/2005 11:17 AM
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Many thanks Irasmilo. Another observation please. Am I correct in assuming the General Partner of the LP should furnish the information for to arrive at the cost basis (income/expense items & cash contributions)?

No. It's your responsibility to keep this information. It's been reported to you on Schedule K-1 each year. That said, many LPs do keep and provide this information to their partners.

I certainly do not have this information. The safest route if the LP does not provide this information would then be to use the original cost of the LP units correct?

As stated above, you do have the information, or now know how to obtain it. (The LP may be able to provide copies of past K-1s.) Unfortunately, the original purchase price is no more right or wrong than any other number you might dream up.

Ira


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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 78312 of 121219
Subject: Re: K1 Reporting Date: 4/5/2005 11:24 AM
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Am I correct in assuming the General Partner of the LP should furnish the information for to arrive at the cost basis (income/expense items & cash contributions)?

Yes. But probably not the way you are thinking. It was provided each year you owned the LP interest, on your K-1. Most items reported on the K-1 affect your cost basis.

I certainly do not have this information.

Yes, you do. In fact, you are the only one who does.

The safest route if the LP does not provide this information would then be to use the original cost of the LP units correct?

No. That is one number that I can guarantee you is NOT your cost basis. It is just the starting point for your cost basis.

To recap, start with your initial purchase price. Add in all the income items shown on your K-1 each year. Subtract off any expense items that were passed through to you separately on your K-1s. Also subtract off all of the distributions you received over the years. Those should also be shown on your K-1. There are a couple of other potential adjustements you'd need to make (perhaps sec 754 depreciation adjustements if you bought the interest after the initial partnership formation). THAT is your cost basis.

If it happens to equal your original purchase, it would be nothing more than a rather unlikely coincidence.

--Peter

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 78355 of 121219
Subject: Re: K1 Reporting Date: 4/6/2005 8:32 PM
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I cannot stress enough Peter's position that your cost is NOT your basis. Review his and ira's post in regard to your basis computations. NOR is the basis shown on the partnership statement of share value your basis. You have done different things with your K-1 items than anticipated by the partnership. For instance, you poabably couldn't take passive losses every year, but could in some years, wheras their tracking of a partners interest assume they took all the passive losses. What a mess. KEEP YOUR K-1s ed


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