How to properly describe Partnership Disposal on Schedule K-1 in TurboTax?

If I select "Complete disposition" but the K-1 doesn't have anything in Box 20 with code Y, should I be concerned? My former partnership sent me a final K-1 but there's nothing specific about the sale on it. Also, would this affect my basis calculation?

That's a bit concerning - if you sold your interest, your final K-1 should typically include information about the disposition. The partnership should have provided details about your share of the partnership's liabilities (which affects your basis) and other information needed to calculate your gain or loss. You should contact the partnership's tax preparer to ask about this omission. Your basis calculation is critical for determining your gain or loss on the sale. If there's no information in Box 20, you'll need to calculate your adjusted basis using your initial investment plus your share of income minus distributions you've received over the years.

How does taxr.ai actually work? Do I need to upload all my partnership documents or just the K-1? My situation sounds similar but I'm wondering if they can help with limited information since my partnership hasn't been great about documentation.

I'm skeptical about these online services. How do you know their advice is accurate? Partnership taxation is extremely complex and the consequences of getting it wrong can be significant. Did they give specific advice about which option to select in TurboTax?

You'll need to upload your K-1 and any other partnership documents you have - the more the better, but they can work with just the K-1 if that's all you have. They use document analysis technology to identify the relevant information and provide guidance based on your specific situation. Regarding accuracy, that was my concern too initially. What impressed me was how they explained each recommendation with references to specific IRS regulations. They provided detailed guidance for TurboTax, including which forms to use and which options to select. In my case, they confirmed I should select "Complete disposition" but also showed me how to properly report the gain, including the split between capital gain and ordinary income portions.

How would Claimyr actually help get through to the IRS faster? The IRS phone lines are notoriously backed up, so I'm curious how any service could change that. Doesn't everyone have to wait in the same queue?

This sounds completely made up. There's no way to "skip the line" with the IRS. You're better off consulting with a qualified tax professional who specializes in partnership taxation rather than wasting money on services claiming to get you through to the IRS faster. These kinds of services prey on desperate taxpayers.

It actually works by continuously calling the IRS and navigating through their phone tree for you. Once they get a human on the line, they call you and connect you to the agent. It's not about "skipping the line" but rather having technology do the waiting for you instead of you having to redial constantly. I understand the skepticism - I felt the same way initially. But it's basically an automated system that keeps calling back when there are busy signals and navigates the confusing IRS phone menus. The service doesn't provide tax advice itself; it just connects you with actual IRS representatives who can properly address your specific questions about things like Schedule K-1 partnership disposals.

Thanks, this is really helpful. My sale agreement does state that I've transferred "all right, title and interest" in the partnership, so it sounds like "Complete disposition" is correct. There was about $23,000 in partnership liabilities that I was relieved of as part of the sale. Should I be including that in my proceeds when calculating gain/loss?

Yes, absolutely include that $23,000 of debt relief in your proceeds when calculating your gain or loss. When you're relieved of your share of partnership liabilities, the IRS treats it the same as if you received that amount in cash. The formula is basically: Amount Realized = Cash received + Fair market value of property received + Liabilities assumed by buyer. Then you subtract your adjusted basis in the partnership interest to determine your gain or loss. So in your case, the $23,000 debt relief is definitely part of your amount realized, even though you didn't physically receive that money.

I switched from TurboTax to H&R Block's premium online version for my partnership returns and found it much better for K-1 issues. It walks you through basis calculations more thoroughly and has better explanations of the disposition options. It also prompted me about hot assets and unrealized receivables that TurboTax never mentioned.

Thanks for the suggestion! I'll look into H&R Block's premium version. Did it handle the calculation of adjusted basis automatically, or did you still need to input all your historical basis adjustments manually? TurboTax made me input everything without much guidance, which left me unsure if I was doing it correctly.

This is really comprehensive advice, thank you! I'm a bit overwhelmed by the complexity of partnership taxation - I had no idea about the ordinary income treatment for depreciated assets. When you mention "unrealized receivables," does that typically apply to service businesses like breweries, or is it more relevant for professional partnerships? I want to make sure I'm not missing anything that could trigger ordinary income treatment versus capital gains on my sale.

Great question! "Unrealized receivables" can definitely apply to breweries and other businesses, not just professional service partnerships. For a brewery, this could include things like accounts receivable for beer sales that haven't been collected yet, or even certain types of inventory depending on the partnership's accounting method. The key thing to understand is that Section 751 "hot assets" (which include unrealized receivables and inventory) are designed to prevent partners from converting what should be ordinary income into capital gains through a partnership sale. So if your brewery partnership had significant inventory on hand, unpaid invoices, or used accelerated depreciation on equipment, part of your sale proceeds might need to be allocated to these assets and reported as ordinary income. Your K-1 should ideally show this breakdown, but if it doesn't, you might need to ask the partnership's accountant for a Section 751 analysis. This is one of those areas where getting it wrong can lead to underreporting ordinary income, which the IRS takes seriously. Given the complexity, it might be worth having a tax pro review your situation to make sure you're not missing anything.