Tax treatment and reporting of Sec. 751 gain or loss

[labergmann]

A client sold their partnership interest. On the sales schedule there is a Sec. 751 gain to be reported as ordinary income. The sales schedule states it should be reported on Form 4797, Part II, line 10. How does this effect the cost or basis of the partnership interest. Is it added to basis or does it reduce basis?

How do I input this information in Lacerte? I can't seem to input the data correctly because it does not ever generate Form 4797.

Please help! I have read everything I can on IRS.gov and Lacerte.

[sjrcpa · Accepted solution]

The 751 Gain is part of what would otherwise be capital gain on the sale of the partnership interest.

So, if there is a $10,000 gain on the sale and $3,000 is 751 gain, you report $7,000 on Schedule D and $3,000 on 4797.

[labergmann]

Thank you. It really was simple once you  explained it.

[sjrcpa]

You're welcome.