Does the 1065 instructions specifically address this situation? I'm looking at the 2023 instructions and I don't see clear guidance on partner-to-partner sales...

One thing to keep in mind is the timing of when you recognize the ownership change during the year. You'll need to determine the exact date when the buyout was completed (when ownership officially transferred) to properly allocate the partnership's income, deductions, and credits. For the K-1s, use the "varying interest rule" under Section 706(d) to prorate each partner's share of items based on their ownership percentage during different periods of the year. So if the buyout happened mid-year, Partner D gets 25% allocation up to the buyout date, then 0% after. Partners A & B get 25% allocation before the buyout, then 37.5% after. Also make sure you update Schedule K-1, Part II (Partner's Share of Liabilities) to reflect the new ownership percentages. Partners A & B will need to pick up their additional share of partnership liabilities as part of their outside basis calculation, even though they paid cash for the interest. The partnership agreement should specify how these mid-year changes are handled - whether you use the closing-of-books method or proration method for allocating partnership items. This affects how precisely you need to calculate each partner's share.

Great question! I actually dealt with this exact scenario when I helped set up a promotional sale for a local retailer. The key thing to remember is that sales tax is calculated on the actual selling price, not the original retail price. For your 1-cent item with a 7.25% tax rate, the calculation would be $0.01 × 0.0725 = $0.000725, which rounds to $0.00. So effectively, no sales tax would be collected on that individual penny item. However, make sure you understand your state's specific rounding rules - some states round at the line-item level while others round at the total transaction level. Most modern POS systems handle this automatically, but it's worth double-checking your settings. Also, keep good records of your promotional pricing for your own business analysis, even though from a tax standpoint it's treated just like any other sale. The promotional price is your actual revenue for tax reporting purposes. Good luck with driving foot traffic to your shop!

This is such a timely question! I just went through this exact situation with my small electronics repair shop when I did a "penny part" promotion last month. What I learned is that you're absolutely right to think about this carefully - the tax calculation on ultra-low prices can be confusing. In my experience, most POS systems handle this by calculating tax on the total transaction amount and rounding to the nearest cent. So your 1-cent item at 7.25% would indeed result in zero tax collected for that individual item. However, I'd recommend calling your state's sales tax department to confirm the specific rounding rules in your jurisdiction, since they can vary. One tip: I found it helpful to run a few test transactions through my POS system before launching the promotion to see exactly how it handles the calculations. That way you'll know what to expect and can explain it to customers if they ask. Also, keep detailed records of the promotion period for your own business analysis - it's useful data even if the tax implications are minimal. The promotion worked great for driving foot traffic, by the way! Hope yours does too.

Has anyone used any of the major tax software programs to handle this specific situation? I'm trying to use TurboTax for a similar issue with GoFundMe medical expenses and can't figure out where to even indicate that some expenses were paid through donations.

This is such a tough situation to navigate, and I feel for your sister dealing with this on top of everything else. Just wanted to add one important point that might help - make sure she keeps detailed records separating what was paid from GoFundMe vs. what came out of pocket, even if she can't deduct the GoFundMe portion. The IRS can be pretty strict about documentation if they ever audit medical expenses, so having clear records showing the source of each payment will be crucial. I'd suggest creating a simple spreadsheet with columns for date, expense description, total amount, GoFundMe portion, and out-of-pocket portion. Also, don't forget about smaller medical expenses that might have been paid directly - things like prescription copays, parking fees at the hospital, or travel expenses for treatment. These add up and are often overlooked but can be deductible if paid from personal funds. Hope your niece continues to respond well to treatment. The tax stuff is complicated but manageable with good record-keeping!

I went through this exact situation two years ago and want to share what I learned. The estimated tax penalty on Line 38 is one of the most commonly misapplied penalties by tax software, especially when you transition from getting refunds to owing money. Since you received a refund last year, you almost certainly qualify for the "prior year safe harbor" rule. This means if your withholding and estimated payments for this year equal at least 100% of last year's total tax (110% if your AGI was over $150,000), you shouldn't owe any penalty regardless of how much you owe this year. Here's what I'd recommend: Don't just accept H&R Block's "the system calculates it automatically" response. Ask to speak with a supervisor or enrolled agent and specifically mention "prior year safe harbor" and "Form 2210." If they still won't help, you can file Form 2210 yourself after your return is processed to claim the penalty waiver. The IRS will accept your payment even if you don't owe it, but getting your money back later can take months. It's worth fighting this now rather than waiting for a refund that might take half a year to arrive.

I had a very similar experience with TurboTax a few years ago - their software automatically calculated an estimated tax penalty even though I clearly qualified for safe harbor. The problem is that most tax software doesn't automatically cross-reference your prior year return to check if you meet the safe harbor exceptions. Since you got a refund last year, you're almost certainly protected by the "100% of prior year tax" safe harbor rule. This means as long as your withholding this year was at least equal to your total tax liability from last year's return, you shouldn't owe any penalty at all. Don't let H&R Block brush you off with "the system calculates it automatically." Their system is wrong in this case. Ask them to show you exactly how they calculated the penalty and demand they review Form 2210 instructions. If they refuse, you can always file Form 2210 yourself after your return is processed to request the penalty be waived. The frustrating part is that if you just pay it now, getting that $550 back from the IRS could take 6+ months. It's definitely worth pushing back on this before you submit your return.

Something else to consider - certain states tax capital gains differently than the federal government. California, for example, treats all capital gains as ordinary income, which can result in significantly higher state taxes compared to federal.

Great question! I went through something very similar last year when I sold some tech stock I'd held for about 8 years. The key thing to understand is that LTCG taxes are absolutely progressive - your entire $530k won't be hit with the 20% rate. Here's what happens: Your $290k salary gets taxed first using regular income brackets. Then your $530k in capital gains gets "stacked" on top of that and taxed using the LTCG brackets. Since your salary already puts you above the 0% LTCG threshold, you won't benefit from that rate. For 2025 MFJ, the 15% LTCG rate applies up to $600,050 total income. Since you're starting at $290k salary, roughly $310k of your gains ($600,050 - $290k) will be taxed at 15%. Only the remaining $220k gets the 20% rate. Don't forget about the 3.8% Net Investment Income Tax that kicks in at $250k MAGI for MFJ - that'll apply to your entire $530k gain since you're well over the threshold. So your effective rates become 18.8% and 23.8% respectively. One more thing - at that income level, definitely consider the timing of the sale. You might want to spread it across tax years if possible to potentially stay in lower brackets, though you'd need to run the numbers with a tax pro to see if it makes sense.