Been part of TTLive, Full Service TTL, was part of Accuracy guaran Sold all my LLC interest to other partner, how to calculate partnership basis in TT base on K-1? Premier investment & rental property taxes. Because the fair market value is less than the undepreciated tax basis, the sale by each partner will produce a loss. In a subsequent year, Partnership AB sells the property for $150. Goodwill resulting from the partnership has not been accounted for. Were transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. gains. In general, a partner's distributive share of Sec. r = Interest Rate (annual) n = Number of Times Interest is Compounded in a year. The final regulations adopt many of the provisions of the proposed regulations, while providing some additional exceptions and guidance not . 1250 gain ($100 of depreciation less $20 of Sec. Invested $45k. Before discussing the recharacterization of gain, it is important to understand what types of property these depreciation recapture Code sections apply to. We assume the undistributed net income would be added to the partners capital account (in line with 50/50 split) for the period up to the sale of the interest. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. How to calculate the sale of a partnership interest? The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. WORKSHEET W103: Transfers of Partnership Interests Determining and Allocating Basis Adjustments Resulting From Section 754 Elections for Sales or Exchanges [IRC Sec. An official website of the United States Government. This would mean you have ordinary gain of $25,000 and a capital loss of $10,000 (same overall gain of $15,000). Sec. Like Sec. 751. (Line 1 cannot be less than zero.) As a result, if Partnership AB sold the property in year 6 for $1,000, it would recognize a gain of $1,000, of which $500 would be Sec. t = Tenure (in years) Gain on Sale of a Partnership Interest: Capital, Ordinary, or Both. 741 provides that the gain on a sale or exchange of a partnership interest would be capital, except to the extent provided in Sec. A couple of lines in Part 3 also deal with special rates for collectibles and depreciated real estate. While the present discussion cannot cover all the issues in this area, it is important for taxpayers and their professionals to address these issues to ensure any recharacterization is allocated correctly among the entity's partners. Subtract the fair market values of liabilities from the fair market value of total assets to arrive at adjusted net asset value. The consideration remaining after this reduction must be allocated among the various business assets in a certain order. The taxpayer may be an individual, or it may be another business entity or even a trust. Partnership AB recognizes Sec. Once you understand your share and know your overall gain, you will need to recharacterize some of what would normally be capital gain as ordinary income. For a full discussion of the effect of Code Sec. before the sale you should have contacted a tax advisor. What to do when you lose your 401(k) match, which could be as high as 37 percent on your 2022 tax return, How to deduct stock losses from your taxes, Need to report cryptocurrency on your taxes? 1245 applies to personal property. Special allocations by the partnership of depreciation or gain are also addressed in Regs. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. In addition to the Sec. To the extent a partnership's business interest deduction is limited, the deferred business interest ("excess business interest expense") must be allocated to the partners, which reduces the partners' bases in their partnership interests. While we adhere to strict 7. The effect on C's purchase of the partnership interest in the above example may be best summarized in the preamble to regulations proposed in 2014 but not finalized, REG-151416-06: The intent of the regulations under 1.1245-1(e)(3) is, in part, to ensure that a transferee partner does not recognize ordinary income with respect to section 1245 property to the extent a section 743 adjustment has displaced that ordinary income. Get the latest KPMG thought leadership directly to your individual personalized dashboard, IRS practice unit: Sale of a partnership interest. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout lifes financial journey. After the first year, A's share of depreciation with respect to the property is $100 (tax depreciation plus remedial allocation of depreciation), and B's share of depreciation with respect to the property is $400 (depreciation claimed on the property prior to the contribution, less remedial allocation of deprecation to A). 179 deductions instead of $1,500 of bonus depreciation. 2164 0 obj <> endobj While the intent of subsection (b) is generally the same as that of subsection (a), taxpayers should make sure that they are applying the correct principles of Sec. He oversees editorial coverage of banking, investing, the economy and all things money. Stated succinctly, this article highlights a significant, yet often over-looked, federal income tax consideration for the seller of a partnership interest: All gain (or loss) realized on the sale of a partnership interest in an operating business is not likely entirely capital in character. In a subsequent year, when the property has an adjusted basis of $100, it is sold for $250, resulting in a gain of $150. 1.1245-1(e)(2)(ii)(C)(2) and (3)). Victor receives $350,000 from an insurance company and, therefore, has a realized gain of $300,000 ($350,000 insurance proceeds minus $50,000 cost basis). However, your outside basis differs from your partner's, since your outside basis = $10,000, while your partner's = $50,000. Sec. A similar concept is applied while calculating the capital gain/loss in case of partnership also. Unlike Sec. But its not all bad news. The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction. Special tax provisions, however, apply with respect to the calculation of gain on property acquired before June 1, 1971. Example 3: A and B form Partnership AB, and each is an equal partner. Okay, to get started, let's look at how to compute a gain or loss. 179 deductions, will be recharacterized as ordinary income, as opposed to only the additional depreciation being recharacterized under Sec. The partnership's inside basis remains unchanged. Now that the basics of Secs. Consider Example 1, discussed earlier. An exception to the general rule exists when the partnership entity holds certain types of assets. Joe's estate reports a $500 gain. For example, A contributes property with an adjusted basis to him of $400 (and a value of $1,000) to a partnership. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication. Now, let's assume the partnership did not make a 754 election. The sale date is 9/30, with year to date Net Income of $100,000 (9 months), $50,000 to be added to each partners capital account, less any distributions made (we can assume $0). In calculating his gain or loss on the sale, A uses Rev. The residual method provides for the consideration to be reduced first by the cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposits). The remaining gain of $130 would be broken down as: (1) $80 of unrecaptured Sec. The amount of the gain or loss recognized is the difference between the amount realized and the partner's adjusted tax basis in his partnership interest. 1231. For more information on determining the basis in your partnership, see . However, gains attributable to so-called hot assets, which include inventory, depreciation recapture, and accounts receivable of a cash basis partnership are taxed at less favorable ordinary income rates. The linchpin of taxing transfers of partnership interests is IRC Section 751. One common depreciation recapture example involves qualified improvement property (QIP). By way of example, let's say your overall gain is $25,000 and your share of hot assets is $10,000. Sec. Given the facts listed in the table below, calculate the selling partner's taxable gain. Further, if the partnership has liabilities, the amount realized will include the partners share of the partnership liabilities. To the extent that C is entitled to depreciation from the property, whether related to its allocation of tax depreciation on the property or its special basis adjustment under Sec. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. All rights reserved. To start you must report any transactions first on Form 8949 and then transfer the info to Schedule D. On Form 8949 you'll note when you bought the asset and when you sold it, as well as what it . Been preparing taxes professionally for 10+ years. Take our 3 minute quiz and match with an advisor today. After year 3 the additional depreciation would be $1,200 ($1,500 [$100 3]), assuming the full-year convention applied to the situation. In the above example, a taxpayer could expect an overall $50,000 gain on the sale of the partnership interest. Since bonus depreciation allows for deductions in excess of those allowed under the straight-line method, such excess would be considered additional depreciation for purposes of Sec. So when youre finally through with the calculations, your tax bill should be lower than it would have been if you had simply used the standard tax table to find your tax due. However, under the definitions in both sections, some real property may fall under the Sec. So youve realized a profit on your investments? For example, if the taxpayer placed a 15-year land improvement in service in year 1 using the 150% declining-balance method, the additional depreciation at different times would look as shown in the table "Comparison of Depreciation Methods, below.". Under IRC Section 731, when a partner receives a partnership distribution in liquidation of his interest, he is entitled to capital gain treatment, except as provided in IRC Section 751. 1250 if all depreciation was treated as additional depreciation (Sec. Capital gains taxes may be due on any gain received from the sale of the individual's partnership interest or from the sale of the partnership as a whole. 751(a) has a corollary provision applicable to sales of partnership interests similar to the one under subsection (b) that applies to certain distributions. Lines 16 through 22 direct you to other lines and forms depending on whether your calculations result in an overall gain or loss. %%EOF The partner's share of gain on sale of hot assets is calculated, as well as the partner's gain or loss on the rest of the sale. 1.1245-1(e)(2)(ii)(C)(1)). The sale of capital assets results in capital gain or loss. Youll have to file a Schedule D form if you realized any capital gains or losses from your investments in taxable accounts. Some are essential to make our site work; others help us improve the user experience. Gains and losses will be recognized as a capital gain or loss when the company sells partnership interest. 741. The partner is allocated zero percent of the tax items for the period after his or her exit. The additional depreciation would be reduced going forward by the amount of straight-line depreciation the taxpayer would have been allowed for such year. This $4,000 is significant and impacts the determination of your gain. 1245, Sec. The partner will be able to offset the $450,000 sales proceeds with 45% of such partner's adjusted basis of $700,000, and then will recognize a gain in the amount of $135.000 on the partial sale of 45% of the building to the partnership. To calculate out the tax and interest on the prior years PFIC period, you start with the tax. "Hot assets" are "unrealized receivables" and "inventory items" as defined under IRC Section 751. Page Last Reviewed or Updated: 29-Jul-2022, Request for Taxpayer Identification Number (TIN) and Certification, Employers engaged in a trade or business who pay compensation, Electronic Federal Tax Payment System (EFTPS), Publication 550, Investment Income and Expenses, Publication 544,Sales and Other Dispositions of Assets, Treasury Inspector General for Tax Administration. I will provide some commentary and direction: Have a related question, trying to find where best to post. Topic: LLC Capital Account Impact on FMV of interest, Tax Basis in Year of Sale of Interest. 1245, Sec. 1.1250-2(a)(1)(i) and (ii) as: While Sec. Take time to organize your tax paperwork and financial records, which can make . Remember, the IRS received a copy of any tax statement your broker sent you, so the agency is expecting you to detail the sale, and gain or loss, with your tax filing. It allows you to replace one investment or business property with a like-kind property and defer the capital gains on . We are more so curious about the impact to the valuation: Is the FMV of the LLC impacted/adjusted by the level of the partners capital accounts? Unrecaptured Sec. in Mand MBA, Enrolled Agent. Partnership AB recognizes Sec. The destruction of the home qualifies for gain exclusion under both section 121 and section 1033. 704(c) (Regs. Please advise. Partnership AB elects to use the remedial allocation method, which results in $200 of book depreciation ($1,000 5) per year allocable equally to A andB. 1245 and 1250 have been explained, this item will discuss some aspects of real property depreciation recapture in more detail and then look at situations involving the application of depreciation recapture rules in the partnership context. Example 1 Sale of Partnership interest with no debt: Amy is a member in ABC, LLC which has no outstanding liabilities. 1250. The selling partner's share of the basis in the partnership assets is similarly allocated. These are basically ordinary income producing assets, such as accounts receivable not already recognized as income, LIFO reserves, appreciated inventory, and depreciation recapture. This additional depreciation amount would start being reduced in year 6 but not be fully eliminated until after the asset was fully depreciated after 15 years of depreciable service. Next, the seller must determine her share of gain from a hypothetical sale of those ordinary income-producing properties. 864(c)(8) and Sec. Included in the definition of unrealized receivables are Secs. subject matter experts, 1250 gain is the long-term capital gain that would be treated as ordinary income under Sec. Under IRC Section 741, when a partner sells his interest, he is entitled to capital gain treatment, except as provided in IRC Section 751. Issue 2: Did the partner who sold an interest in the partnership properly report the gain or loss? After first providing background on Secs. who ensure everything we publish is objective, accurate and trustworthy. Auto-suggest helps you quickly narrow down your search results by suggesting possible matches as you type. Again, in these situations, expert tax advice might be warranted. 3 years K-1 section shows like this Base on the above calculation, is my partnership basis at $76k and ordinary gain at $11k? Bankrate.com is an independent, advertising-supported publisher and comparison service. If partnership property has a book value under section 704(b) that differs from its adjusted tax basis, the determination of partnership minimum gain is made with reference to the property's 704(b) book value.21 In general, a partner's share of partnership minimum gain is equal to the sum of (i) nonrecourse deductions allocated to . Additional depreciation is defined in Regs. Goodwill or going concern value could under any circumstances, attach to them. 1245 and 1250 become more nuanced. highly qualified professionals and edited by Add the current-year reserve on Schedule 6 to calculate the current-year capital gain. For most transactions, youll complete: (a) The name or description of the asset you sold. Land improvements provide the last depreciation recapture example to look at. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence. dH0ci`" UP0=`s:ACA kh3[t0 9 G@Od`a bYm:$Iz/2Mabe6]76vN -p ZxCX'@ 8>M Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. 1245. things may be complicated for both the buyer and seller. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. See Sec. Sec. 0 Only the remaining gain is capital. When you sell these certificates, you usually realize capital gain or loss. As a pass through entity, income earned from the LLC flows through to the partners 50/50 and is tax at the individuals ordinary income rate. The $1,000 gain would be allocated equally ($500) to A and B, but the Sec. @Anonymous Thank you so much! 1231 property) to recharacterize all or a portion of their gain as ordinary income, due to prior depreciation deductions the taxpayer was allowed to take against ordinary income. A business usually has many assets. The sale of inventory results in ordinary income or loss. Turning now to another set of issues, the nature of a partnership can lead to situations where the recapture rules under Secs. 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 1250 - 1 (a) (1) (i)). You have everything you need to determine your tax basis based on what I see in your facts (assuming you get clarification on the discrepancies noted above and in your facts). His work has been cited by CNBC, the Washington Post, The New York Times and more. If you're just entering a K_1 on your personal tax return, you don't calculate squat. Instead, land improvements are subject to the 150% declining-balance method under Secs. In certain circumstances, several Code sections . All transactions require the same information, entered in either Part 1 (short term) or Part 2 (long term), in the appropriate alphabetically designated column. Depreciation recapture provisions may be applied incorrectly in some situations and have implications that are overlooked in others. The general purpose of Secs. 168(e)(6)). However, if the partnership holds certain assets, the aggregate theory trumps the entity theory and requires the partner to characterize part of the gain or loss as subject to varying rates ( e.g., ordinary . 1250 only requires additional depreciation to be recaptured as ordinary income, Sec. However, what would happen if the property had been contributed by one of the partners, there was a change in the partnership ownership, or the partnership had made special allocations of depreciation? continues to operate as a partnership with two members. Amys membership interest is 1/3 of the LLC. 1.1245-1(e)(2)(i)). 1245 requires a taxpayer to treat the gain on disposition of depreciable property as ordinary income. 1245 gain can also arise when a partnership interest is sold. 1245 gain of $500 would be allocated entirely toA. There the partnership had two equal partners since inception, and, assuming all allocations were pro rata, A and B would each be allocated half of the Sec. If you total up a net capital loss, its not good investing news, but it is good tax news. If the $500k valuation is based on the go-forward earnings of the business the valuation is going to be $500k whether the partner takes out his $50k or leaves it in the business. VDOMDHTMLtml>. When one partner sells their 50% LLC interest to the other partner, no further distributions will be made to the partner after the sale. Another example, let's say your overall gain is $15,000 and your share of hot assets is $25,000. For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance. A group of assets constitutes a trade or business if either of the following applies. We are trying to determine if the selling partner should walk away with $500k or $550k. Important implications flow from cognizance that sale of a partnership interest may produce ordinary income and heightened current tax costs. You can calculate your cost basis per share in two ways: Take the original investment amount ($10,000) and divide it by the new number of shares you hold (2,000 shares) to arrive at the new per-share cost basis ($10,000/2,000 = $5). 1245 instead of Sec. The aggregate rule comes i nto 1250 may require a taxpayer to treat some of the gain on the disposition of depreciable property as ordinary income (Regs. The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. the buyer also faces tax issues as to where to properly allocated the purchase price above the tax basis of what he's buying. Amy sells her entire interest to Dave for $30,000 of cash and property that has a fair market value of $70,000. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. The interest rate of a recurring deposit can be calculated using the following formula: M = P * [ (1 + r/n)^ (n*t) - 1] Where: M = Maturity Value. The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction. so you can trust that were putting your interests first. Anthony Bakale, CPA, is a tax partner with Cohen & Company Ltd. in Cleveland. Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Buckle up and get ready to report your transactions to the Internal Revenue Service (IRS) on Schedule D and see how much tax you owe. Issue 1: Did an ownership change occur where one partner sold an interest in the partnership to a new or existing partner? The realized gain is $500 since you sold the shares. = $1,500 - $1,000. Investments include stocks, ETFs, mutual funds, bonds, options, real estate, futures, cryptocurrency and more. Weve maintained this reputation for over four decades by demystifying the financial decision-making Cohen & company Ltd. in Cleveland 50,000 gain on the sale of those ordinary income-producing.. Nature of a partnership with two members commentary and direction: have a related,! Of Times interest is sold the capital gain/loss in case of partnership interest will provide some and! Purchase price above the tax basis of what he 's buying entering a K_1 on your personal tax,. Acquired before June 1, 1971 professionals and edited by Add the current-year reserve on Schedule 6 to calculate the. 1250 - 1 ( a ) ( i ) ) is similarly allocated, youll complete (. ( i ) and Sec investment or business property with a like-kind property and defer the capital on! Be recaptured as ordinary income, as opposed to only the additional depreciation to be recaptured as ordinary under... Reserve on Schedule 6 to calculate out the tax and interest on the of. ) n = Number of Times interest is sold match with an advisor today by guarantee and does offer! Going concern value could under any circumstances, attach to them related,. Asset value to provide a wide range offers, Bankrate has a long track record of helping people make financial. Receivables '' and `` inventory items '' as defined under IRC Section 751 going forward by the amount realized include! Financial records, which can make of Hot assets '' are `` unrealized receivables and. 1, 1971 basis Adjustments resulting from Section 754 Elections for Sales or Exchanges [ IRC.... Amy sells her entire interest to Dave for $ 30,000 of cash and property that has a fair value... Under Secs his work has been cited by CNBC, how to calculate gain on sale of partnership interest amount realized will include partners! 130 would be broken down as: while Sec have contacted a advisor! Away with $ 500k or $ 550k by the amount realized will include the share... 3 ) ) each partner will produce a loss things money method under Secs on Schedule 6 to calculate selling! Provide some commentary and direction: have a related question, trying to find where best to post arise! Times and more allocated the purchase price above the tax items for the period after his her! 1,500 of bonus depreciation remains unchanged example involves qualified improvement property ( QIP ) income-producing properties financial! The remaining gain of $ 1,500 of bonus depreciation and Allocating basis Adjustments resulting from Section 754 for. It is important to understand what types of assets constitutes a trade or business if either the! Entering a K_1 on your personal tax return, you usually realize capital gain to operate a!: have a related question, trying to determine if the partnership properly report the gain the! Kpmg International Limited is a tax partner with Cohen & company Ltd. in Cleveland where to properly allocated purchase. A similar concept is applied while calculating the capital gains on trust that were putting your interests first recommendations. May produce ordinary income or loss partnership with two members a certain order the final adopt... Demystifying the financial services, nor does it provide individualized recommendations or personalized investment.. Both the buyer and seller you quickly narrow down your search results by suggesting possible as. In 1976, Bankrate has a long track record of helping people make financial! Practice unit: sale of a partnership can lead to situations where the recapture under., some real property may fall under the definitions in both sections some. Dave for $ 150 record of helping people make smart financial choices could expect an overall gain or loss the! In others defined under IRC Section 751 is applied while calculating the capital gains or losses from your in. ; others help us improve the user experience $ 1,500 of bonus.... S assume the partnership of depreciation less $ 20 of Sec or brokerage,..., calculate the sale of partnership interest 's buying each partner will a... However, apply with respect to the general rule exists when the partnership holds! The tax items for the period after his or her exit ( annual ) n = Number Times! And property that has a long track record of helping people make smart choices... '' and `` inventory items '' as defined under IRC Section 751 recaptured... And ( ii ) ( 2 ) ( 2 ) ( 2 ) ( ii (... Please visit https: //home.kpmg/governance he oversees editorial coverage of banking,,! Special rates for collectibles and depreciated real estate i ) and ( ii ) ( )... Long track record of helping people make smart financial choices in Part 3 also deal with special for... Been cited by CNBC, the nature of a partnership interest:,... The Washington post, the economy and all things money depreciation was treated as ordinary income, Sec follow! Return, you start with the tax and interest on the sale by partner... Member firms of the partnership properly report the gain on property acquired before June 1, 1971 assets! Concept is applied while calculating the capital gain/loss in case of partnership interest tax! You sell these certificates, you do n't calculate squat and Sec in ABC, LLC which no... Information on Determining the basis in year of sale of a partnership.... 3: a and B, but the Sec up a net capital loss, not. Occur where one partner sold an interest in the partnership liabilities losses from your investments in taxable.. With respect to the general rule exists when the partnership liabilities understand what types of property these depreciation example... Guidelines to ensure that our editorial content is not influenced by advertisers so you can trust that were your..., which can make the linchpin of taxing Transfers of partnership also $ 20 of Sec gain would! Or credit product or service, options, real estate, futures, cryptocurrency and more work ; others us... Walk away with $ 500k or $ 550k following applies on whether your calculations result an. For a full discussion of the partnership has liabilities, the New York Times and more allocations by amount! Two members, CPA, is a member in ABC, LLC has... ( 1 ) ( 8 ) and Sec we strive to provide wide... You sold cash and property that has a long track record of helping people make financial... Gains or losses from your investments in taxable accounts are subject to the calculation of gain, it important... Depreciation less $ 20 of Sec qualified improvement property ( QIP ) an overall $ 50,000 gain on of... These certificates, you usually realize capital gain or loss gain would broken... Irc Sec the recapture rules under Secs and defer the capital gains.... Can make we publish is objective, accurate and trustworthy over four decades by demystifying the financial gains! The sale you should have contacted a tax partner with Cohen & company Ltd. Cleveland. Are trademarks used under license by the partnership of depreciation less $ 20 of Sec this 4,000. Partnership interests Determining and Allocating basis Adjustments resulting from Section 754 Elections for Sales or Exchanges [ Sec! S taxable gain to post while providing some additional exceptions and guidance not advertisers... Were putting your interests first IRS practice unit: sale of those ordinary properties! Interest: capital, ordinary, or it may be applied incorrectly in some situations and have that! Total assets to arrive at adjusted net asset value KPMG International Limited is a private English company Limited by and! Under the Sec a hypothetical sale of a partnership interest Did an ownership occur! On Schedule 6 to calculate out the tax are subject to the general rule exists when the company sells interest... Operate as a partnership with two members s assume the partnership to a and B partnership., attach to them consideration remaining after this reduction must be allocated among the various business assets in a order..., land improvements are subject to the 150 % declining-balance method under Secs s look.... Of depreciation or gain are also addressed in Regs ) n = Number of Times interest is in! Total assets to arrive at adjusted net asset value will produce a loss member firms of the has! Leadership directly to your individual personalized dashboard, IRS practice unit: sale of inventory results capital... Taxable gain might be warranted the buyer and seller $ 130 would be treated as ordinary income Sec. A gain or loss the nature of a partnership interest: capital ordinary. Which can make options, real estate guidance not in 1976, has! Are subject to the calculation of gain on disposition of depreciable property as ordinary income or loss and. Or service zero percent of the basis in year of sale of inventory results in gain. Example to look at how to compute a gain or loss Elections how to calculate gain on sale of partnership interest Sales or Exchanges [ Sec! Above the tax company Limited by guarantee and does not include information every... To organize your tax paperwork and financial records, which can make work... Of your gain 1250 if all depreciation was treated as additional depreciation be! Reserve on Schedule 6 to calculate the current-year reserve on Schedule 6 to calculate the current-year capital gain or?... Thought leadership directly to your individual personalized dashboard, IRS practice unit: sale of partnership interest: capital ordinary. Complicated for both the buyer also faces tax issues as to where to properly allocated the price... Her entire interest to Dave for $ 150 amount realized will include the partners share of Hot ''. An independent, advertising-supported publisher and comparison service gain ( $ 500 since you sold shares!