This is an excellent discussion! I wanted to add a perspective from someone who's worked through several hedge fund redemptions over the years. One thing I haven't seen mentioned yet is the importance of understanding your "outside basis" versus the partnership's "inside basis" in its assets. Your outside basis is your tax basis in the partnership interest itself (initially your $125k investment, adjusted for your share of partnership income, losses, and distributions over time). The inside basis is the partnership's basis in its underlying assets. When you redeem without a Section 754 election, you're essentially selling your partnership interest, and your gain/loss is calculated based on your outside basis. But here's where it gets tricky - if there's a significant difference between the partnership's inside basis and the fair market value of its assets, you could end up with some unexpected tax consequences. Also, make sure to ask your fund about any "built-in gains" or "built-in losses" that might affect your redemption. Some funds hold positions that were acquired at different times with different basis amounts, and this can impact how your share of unrealized gains gets characterized upon exit. Finally, don't forget about state tax implications! Some states treat partnership redemptions differently than federal tax law, so if you're in a high-tax state, that's another layer to consider in your planning. The partnership agreement really is your best starting point - it should spell out most of these details, including whether they've made the various elections that could affect your tax treatment.

This thread has been incredibly educational! I'm a tax professional who works with several hedge fund investors, and I wanted to add a few practical points that might help others in similar situations. First, regarding the timing of your redemption - consider requesting a "pro forma" redemption statement from your fund before you actually redeem. Many sophisticated funds can provide estimates of how your redemption would be taxed if you redeemed on various dates. This can help you optimize the timing, especially if you have other capital gains or losses to consider for the year. Second, if your fund doesn't readily provide detailed tax information, it's worth noting that larger funds often have dedicated tax teams or work with specialized accounting firms that understand these complexities. Don't hesitate to escalate beyond investor relations if you're not getting the detail you need - accurate tax reporting is in everyone's interest. Finally, for anyone dealing with multiple partnership investments, consider keeping a detailed spreadsheet tracking your basis adjustments year over year. Partnership K-1s can be confusing, and having your own records makes it much easier to calculate gain/loss on redemptions accurately. I've seen too many investors overpay taxes because they couldn't properly track their adjusted basis in partnership interests. The partnership taxation rules are genuinely complex, but most issues can be resolved with the right documentation from your fund. Don't be afraid to ask detailed questions - it's your money and your tax liability!

I've been on several J1 visas and honestly the tax situation is a nightmare every time. My best advice: if your return is relatively straightforward (just W2 income), try GlacierTax - they're much cheaper than Sprintax and design specifically for international students.

As someone who's gone through this exact situation, I'd recommend checking if your university has any free tax preparation services for international students first. Many schools offer VITA (Volunteer Income Tax Assistance) programs that specifically help J1 visa holders with their non-resident returns. If that's not available, I've had good experiences with both GlacierTax and TaxAct's non-resident option that others mentioned. The key is making sure whatever service you choose can handle Form 1040-NR and knows about tax treaty benefits for your home country. One tip: before you file, double-check if you qualify for any tax treaty exemptions. Many J1 holders don't realize they might be eligible for partial or full exemption on their income depending on their home country's tax treaty with the US. This could save you hundreds or even thousands of dollars. Also, keep all your documents (W2, DS-2019, passport pages, etc.) organized - you'll need them for the non-resident filing process regardless of which service you use.

As someone who's dealt with both unfiled returns and PTO payouts, I'd strongly recommend getting those back tax filings sorted out ASAP before making any decisions about the PTO timing. The IRS has different rules and potential penalties for late filing that could affect your overall tax strategy. For the PTO itself, one thing to consider is your state's tax situation too - some states have different withholding rules for lump sum payments that could impact your decision. Also, if you're planning to use any of that $10k for major purchases or debt payoff, the timing of when you actually receive the cash (after withholding) vs. when you get it back as a refund could matter for your financial planning. Given the complexity with the health insurance subsidies, unfiled returns, and potential salary increase, this might be worth a consultation with a tax professional who can run the numbers for your specific situation rather than trying to figure it all out on your own.

I've been through something very similar with a large PTO payout and unfiled returns. Here's what I learned that might help: First, regarding the withholding vs actual tax liability - you're absolutely right that it evens out when you file. However, there's a cash flow consideration many people miss. If you take the lump sum now, you'll likely have 22% federal plus state withholding taken out immediately, but you won't see that money back until you file your return (which could be months away if you're still catching up on prior years). For the health insurance subsidies, this is actually the biggest factor in your decision. The ACA subsidy cliffs are steep - you could lose thousands in premium tax credits by going just a few hundred dollars over the income threshold. Since you mentioned expecting a salary increase next year, splitting the PTO between December and January might be worth it just to manage your annual income in each tax year. One thing I don't see mentioned yet - since you haven't filed for 3 years, you should know that the IRS stops processing refunds after 3 years. So if you had refunds coming for 2021 or earlier years, you may have lost them permanently. This makes it even more important to get caught up on those filings before worrying about optimizing this PTO payout. My suggestion: handle the unfiled returns first, then use those actual income figures to model out how the PTO timing affects your taxes and subsidies for both this year and next year.

Have you considered using different tax software to get another perspective? I was in a similar situation and tried filing my taxes with both TurboTax and H&R Block online to see if they interpreted my custody situation differently. TurboTax told me I couldn't file HOH with 50/50 custody if I wasn't claiming the dependent, but H&R Block's questionnaire was more detailed and determined I could because my daughter was physically present in my home for 183 days that year (I kept meticulous records). The difference in my refund was over $2,000!

I went through this exact situation two years ago and it was so confusing! What helped me was creating a detailed custody calendar showing exactly which nights my daughter stayed at each home. Even though our decree said "50/50," the actual schedule meant she was with me 186 nights and with my ex 179 nights due to how holidays and school breaks fell. That extra week made all the difference for HOH qualification. I kept records of school pickup/dropoff, overnight stays, and even had my daughter's school confirm which address was listed as primary. The IRS wants to see actual physical presence, not just what the divorce decree says. My tax preparer initially told me I couldn't file HOH in years when my ex claimed the dependency exemption, but after showing the detailed custody records, we discovered I qualified based on the "more than half the year" test. The key is proving she lived with you for at least 183 days, regardless of who gets the dependency exemption. I'd recommend tracking every single night this year so you have concrete documentation. Even if your arrangement is supposed to be exactly 50/50, real life rarely works out to be perfectly equal when you count actual overnights.

Just to add one more consideration - make sure you're documenting this transition properly beyond just the tax forms. Since the departing partners are becoming tenants in common rather than partners, you should have: 1. An amendment to the partnership agreement documenting the withdrawal 2. A deed transferring the appropriate property interests 3. A new TIC (tenants in common) agreement for all four owners This helps substantiate the tax treatment and ensures everyone understands their rights and responsibilities going forward. The K-1 reporting is important, but the legal documentation is equally crucial.

This is a great discussion covering all the key technical aspects! Just wanted to add one practical tip from my experience with similar situations in ProConnect: Before you process the property distribution in the software, make sure to run a detailed partner capital account reconciliation report. This will show each partner's outside basis components before the distribution, which is crucial for calculating the correct basis adjustments. Also, when you're in the K-1 distribution section and selecting the property from the asset list, pay close attention to how ProConnect allocates any accumulated depreciation. I've seen cases where the software doesn't properly split the depreciation between distributed and retained portions, especially when only part of a property's ownership is being distributed. One more thing - after processing everything, generate a detailed K-1 with attachments to review exactly what statements ProConnect is creating. You may need to customize or supplement these to ensure they include all the required details about the property's characteristics, holding period, and any special allocations. The learning curve is steep with these complex distributions, but once you work through one properly, the process becomes much clearer for future cases!