Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

A 66%-partner sells out of the R.E. rental partnership that owned one medical building. Do the new partners need a new EIN? How to recapture depreciation?

Greta
Level 8

The selling partner presents himself as merely the new lender to the partnership, a lawyer drew up a promissory note but not a sale 1099-S, because the partnership itself continues to own the building. How do I set up the installment sale, I understood the depreciation must be recaptured in year of "sale."

Labels (1)
0 Cheers
2 Replies 2
George4Tacks
Level 15

It sounds like the partner sold their interest and the partner has a reportable even. You need to look at the partners basis for generating what sounds like an installment sale of a partnership interest. It does not sound like the building was sold, so there would be no recapture.

Previously the partnership would have terminated, but TCJA changed that https://www.irs.gov/newsroom/questions-and-answers-about-technical-terminations-internal-revenue-cod... 

What tax returns are you preparing? 


ex-AllStar
0 Cheers
qbteachmt
Level 15

Your one partner is selling the equity position to the other partners that remain; think of this as outside of the operations of the partnership, itself. It would require that the partnership be valued, and the selling partner has their basis, prior equity, and then any gain (or loss) from this new, current valuation. Next, the partnership doesn't buy out the partner. The others have to pay. This is between the humans and does not involve the real estate.

If those other partners cannot afford to buy this person out, and the equity position changes to Loaned to the Partnership, the payments are still considered from the partners as their equity. You cannot buy out that one partner with Partnership funds, since all of that is something this person is already entitled to from their 66% ownership position.

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers