Sale of Partnership to another individual

Forum|Forum|6 years ago
December 20, 2019
6 replies
48 views

If a partner sells their interest in the partnership, but has a negative capital account, does the adjustment to the capital account to make it zero show as a capital gain to the partnership with a special allocation to the partner that is selling their interest?

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George4Tacks

Level 15

The sale has no impact on the partnership. The seller needs to deal with their negative capital account on their Schedule D.

Answers are easy. Questions are hard!

C

cherylgolichAuthor

Level 3

Which makes sense to me but what incentive does partner have to report capital gain if not reported on K1. Especially in the situation of a disgruntled partner.

sjrcpa

Level 15

Put a note on the K-1 along the lines of: At the time of the sale of your interest in this partnership you had a negative capital account of XXXX. This may result in taxable income to you. Consult your tax advisor. Also you're filing Form ~~8594~~ 8308, right?

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

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