KateLang Posted March 19, 2013 Report Posted March 19, 2013 The scenario is that a partner sells interest in partnership on Jan 1st. However, during the year a distribution is still made to the individual. How should this be reported on the K-1 to be properly taxed? Would a 1099 also need to be issued? Quote
SFA Posted March 19, 2013 Report Posted March 19, 2013 What is the nature of the distribution? For services rendered after the partner sold out? As part of a sale agreement to payout according to some sales formula? More information is needed. Quote
KateLang Posted March 19, 2013 Author Report Posted March 19, 2013 The partner sold the interest to another partner mid-year, and the distribution occurred prior to this point. However, the effective date of transferring interest in the partnership was Jan 1st. per the articles of organization of the partnership. Quote
SFA Posted March 19, 2013 Report Posted March 19, 2013 Hmmm. The partner sold mid-year but the sale is retroactive to beginning of year? Even though the articles of organization of the partnership stipulate an effective date of January 1st, looks like the partners adjusted that document by over-riding the rule. Quote
KateLang Posted March 19, 2013 Author Report Posted March 19, 2013 I agree that it does appear that an override of the rule occurred. With this in mind, would a 1099 need to be issued for the distribution or should the partner's ending basis be adjusted to the actual date of the sale as opposed to the effective date? I really appreciate the attention that you have given this matter. Quote
SFA Posted March 19, 2013 Report Posted March 19, 2013 I think I would sort this out using the K-1 based on the actual circumstances, and classify the distribution based on what it was consideration for. Now the monkey wrench. How many partners are there? Did one partner sell to another, OR did the partnership buy him out? Who did he sell out to? Quote
KateLang Posted March 19, 2013 Author Report Posted March 19, 2013 The partner sold the interest in the partnership to just one other partner. However, the distribution in question is not what the partner received as a buy-out. The distribution received was part of a normal distribution that all of the partners had received. Obviously, the other partners still had a basis in the partnership, so there is no question as to how their distributions are to be reported. Quote
SFA Posted March 19, 2013 Report Posted March 19, 2013 Oh, then I would treat his distribution the same as the others. Quote
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