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

Sale of Partnership to another individual

cherylgolich
Level 2

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?

0 Cheers

This discussion has been locked. No new contributions can be made. You may start a new discussion here

6 Comments 6
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.

Here's wishing you many Happy Returns
cherylgolich
Level 2
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.
0 Cheers
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?


Ex-AllStar
cherylgolich
Level 2

great suggestion regarding note on K-1; thanks sjrcpa! I wasn't going to file the 8594 because I'm not doing the partners returns. This should be filed with the individuals returns correct?

0 Cheers
George4Tacks
Level 15

Yes  8594 would be part of the 1040 forms to be filed. The partnership may have to file 8308.


Here's wishing you many Happy Returns
0 Cheers
sjrcpa
Level 15

I  meant Form 8308. Sorry.


Ex-AllStar