Level 5

Question

1065 partnership sale

Forum|Forum|4 years ago
May 20, 2022
4 replies
19 views

Clients sold the business. Sold 720,000.00 cash payout 510,000.00 split between two partners. Installment sale for the remaining 210,000.00. Each partner received a 1099-S for the full 720,000.00 and each partner received an installment sale agreement for the 210,000.00. Not sure what to do about this, it seems like each should have received a 1099-s for 360,000.00 and each should have received an installment sale agreement for 105,000.00. Both documents above in their social security number.

If I don't record the 720,000.00 and the 210,000.00 on each partner they will get a notice. Any help would be appreciated.

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IRonMaN

Level 15

What all did they actually sell?

Slava Ukraini!

B

BrainstromAuthor

Level 5

They sold the business, a/P, A/r, and inventory. It is on the K-1's line 20P. I am recording the installment sell on the 1040 individuals, but the installment sell through the Title company says the are both getting 210,000.00, which is incorrect.

joshuabarksatlcs

Level 9

Very tangled-up info...

1. Clients sold the business. Sold 720,000.00 cash payout 510,000.00 split between two partners. Installment sale for the remaining 210,000.00.

2. Each partner received a 1099-S for the full 720,000.00 and each partner received an installment sale agreement for the 210,000.00.

2. is contradictory to 1. How about requesting a correction for the 1099-S and "Installment sale agreement" issuer/preparer???

As @abctax55 pointed out, was the 1099-S even appropriate?

If the Installment sale agreement was prepared in the name of the TWO partners as the selling party, and each received a copy, it might not be incorrect. If the copy received by each partner was in the name of the partner, how about the payment amounts stated on the agreement. Was it based on the total ($210,000)? If so, did the buyer pay (or has been paying) the doubled-up amounts?

3. 1099S issued under SSN, for the full amount for each partner.

Did you review the sale/purchase agreement? Who exactly was the selling party - the partnership or the partners?

4. They sold the business, a/P, A/r, and inventory.

Bear in mind that inventory is not eligible for the installment method. (IRS Pub 537: The sale of inventories of personal property can’t be reported on the installment method. All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years.)

Neither is the partnership interest that was attributable to unrealized receivables. (For example, see Mingo, T.C. Memo 2013-149)

Who buys A/P? I have some for sale.

5. It is on the K-1's line 20P.

What was the "it" that was on the K-1 Line 20P. How much? And why? Who prepared the Form 1065? Has the partnership return been filed?

Key general point: As in any other tax area, make sure to have all the necessary information in reporting a transaction.

I come here for kudos and IRonMaN's jokes.

abctax55

Level 15

I believe F 1099-S is only used for real estate sales.

You didn't list any real estate in the items sold.

And if the *partnership* sold the assets, why were SSN's used?

Either the Title Co is wrong, or there are some missing facts that the Title Co didn't know, or we don't know.

Any chance there was a drop/swap scenario?

HumanKind... Be Both

B

BrainstromAuthor

Level 5

There were several good ??'s for me to analyze to figure out how to handle this transaction. I am merely unsure on how to record the transaction at hand. Hoping to get some insight while learning.

The sales agreement is selling the Retail grocery business to the two owners. As stated above the purchase price is 720,0000.00, cash paid 510,000.00 and the remaining amount is in an installment sale of 210,000.00. My problem is they both received a 1099-S for the sale of real estate in the amount of 720,000.00. Each have an installment sale set up through the title company for 210,000.00. This doubles everything. I will reach out to the title company and see if I can come up with something.

I did not prepare the 1065 partnership return which has been e filed. These clients brought me their taxes to process with the K-1 from the above retail grocery business. On the K-1 line 20 P it shows:

Date acquired, date sold, selling price (720,000.00), gross profit, gross profit ratio, contract less money received (510,000.00), installment sale income, deferred obligation (210,000.00), partners percentage 50%, partners share of deferred obligation 105,000.00. Possibly if someone can tell me where to put K-1 Line 20P information, that will clear things up on paper.

Thank you for any additional input

abctax55

Level 15

selling the Retail grocery business to the two owners

This statement makes NO sense. They are selling it to themselves????

And you still haven't answered if there's REAL ESTATE involved. That's what generates a F 1099-S.

(edit... NOW I see that the RE was 'finally' answered, in the minutiae of one response)

HumanKind... Be Both

JRC

Level 7

@Brainstrom I find it helpful to first contact the preparer of the Business Return (K1) to verify the information you have received from the Client. Many times the Client has no idea on what actually transpired and will most likely NOT give you the appropriate forms (documents) to process their returns correctly. Just my thoughts on this.

Take care.

IRonMaN

Level 15

Someone actually laughs at my jokes?

In summation to this whole mess of rudeness and smartness, the answers provided here are only as good as the information provided (I think I have mentioned that a time or two here). Folks need to understand what their problem really is before they ask folks here to solve it. There are a few half baked mind readers but no miracle workers hanging out here.

Slava Ukraini!

joshuabarksatlcs

Level 9

RE: Someone actually laughs at my jokes?

Yes, I few of us do. Laugh at, as in (1.) to be amused by.

Others also do, as in (2.) to make fun of; ridicule; deride.

2 meanings per Mr. Webster. Some actually do both....

Thus, safe for you to say 120% of folks laugh at your jokes...

I come here for kudos and IRonMaN's jokes.

joshuabarksatlcs

Level 9

Meant to say "A few of us do".

I come here for kudos and IRonMaN's jokes.

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