Level 5

Question

Excluding Gain on Sale of Property in 1065

Forum|Forum|3 years ago
September 16, 2022
24 replies
105 views

2 partners owned a property together and lived there together for several years (brothers).

Partner A moved out prior to Partner B. Partner A does not meet the exclusion requirements.

Partner B does meet the exclusion requirements as he lived there 2 of the last 5 years.

Currently, the property is in a 1065 owned by A and B.

Where on the 1040 is the gain entered given that the property is currently under the 1065?

How do I enter in ProSeries to ensure it flows correctly?

ProSeries Professional

This topic has been closed for replies.

abctax55

Level 15

Does a partnership 'get' to use the exclusion? I don't think so...

HumanKind... Be Both

T

tccpg289Author

Level 5

No but it will flow through to the individual.

BobKamman

Level 15

Sounds like the same question from earlier this week, from someone whose mind was already made up based on the most insignificant authority, a PLR from a couple decades ago. And was the property already sold? By the partnership? Same thing I said last time, transfer it out to the partners before sale.

T

tccpg289Author

Level 5

It has not yet been sold - can you confirm how to transfer? Where would it all get entered in ProSeries?

BobKamman

Level 15

State law might apply so ask locally. I would deed it from "A&B Partnership" to "A, a 50% interest" and "B, a 50% interest." Is the partnership engaged in any business or own other real estate as rentals? I would not guarantee to the clients that IRS would agree with use of the Section 121 exclusion, and advise them that IRS once said it was OK but then changed its mind in one particular situation.

sjrcpa

Level 15

Is it really owned by a Partnership?

Or is it owned by Person ~~Brother~~ A and Person ~~Brother~~ B?

The more I know the more I don’t know.

BobKamman

Level 15

I am not finding where these partners are brothers.

sjrcpa

Level 15

Neither am I. Don't know where I conjured that up. 🙂

The more I know the more I don’t know.

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TaxPrep1

Level 3

If they used to live in the property, there is no need to file 1065 since it’s not an investment, if one of the partners used it as an investment, then he should have filed it on his 1040 Sch E with 50% ownership and when they sell it he will file it as selling a business property and no exclusion applies, and the brother who is living there can file selling as main home and calculate his gain only.

I 1065 was already filed last year as an investment for both, then I would file it again to calculate the investment profit and loss, issue final K-1s, then do the selling on each 1040 as I mentioned above.

sjrcpa

Level 15

Who legally owns it?

~~Schedule E is probably not appropriate for a "rental" between co-owner family members.~~

The more I know the more I don’t know.

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tccpg289Author

Level 5

It is owned jointly by the brothers.

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