Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Yes, limited partnerships are fun!

The cash you receive from them is not your taxable income. It is technically a return of your capital. Your taxable income is whatever is reported to you on the K-1.

To properly calculate your basis in a partnership, you start with the original purchase price. Add in your share of income from the K-1. Subtract off any deductions the partnership passed through to you and your share of non-deductible expenses (also reported on the K-1). Subtract off the distributions made to you. The result is your basis.

If, by chance, a distribution reduces your basis to zero, the only that portion of the distribution that gets your basis down to zero is tax free. The remaining amount becomes a taxable capital gain.

Then, when you sell the partnership interest, the difference between the sale price and your basis is your gain or loss.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.