Partnership Property Distribution Tax Reporting - Need Guidance on K-1 Box 19 Requirements!

The property distribution to a partner requires proper disclosure on the K-1. For Box 19 (Distributions), you'll need to show the adjusted basis of the property being distributed. You're correct that footnotes are required for a property distribution. The footnotes should include: - Description of the distributed property - Fair market value of the property at distribution date - Adjusted basis of the property (original cost minus accumulated depreciation) - Acquisition date (to establish holding period) - Distribution date Since the partner's basis equals the book value of the property, there shouldn't be any gain recognition. The partner will continue the same depreciation schedule going forward. The footnotes provide the necessary information for the partner to properly report their ongoing ownership of the property.

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Something everyone seems to be missing - you need to be careful about Section 737 here. If the partner previously contributed appreciated property to the partnership (other than the cash contribution you mentioned), receiving this distribution of different property could trigger gain recognition under 737. I'd check if this partner contributed any other property in the past 7 years. The 7-year period for Section 737 can sneak up on you if you're not tracking previous contributions carefully.

Has anyone mentioned Form 8824? If this distribution is part of a partnership dissolution or restructuring, you might need to report it as a like-kind exchange. I had a similar situation and my CPA insisted we needed this form.

I've been through several partnership property distributions and want to emphasize something that often gets overlooked - make sure you're also considering the impact on the remaining partners' capital accounts and basis adjustments. When property gets distributed, the partnership needs to make corresponding adjustments to all partners' capital accounts under Section 704(b). If you have a Section 754 election in place (which many partnerships forget they have), you'll also need to make basis adjustments to the partnership's remaining assets under Section 734(b). For your Box 19 reporting, beyond what Giovanni mentioned about the basic disclosures, you should also confirm whether the partnership needs to report any Section 734(b) adjustments that affect the other partners. These adjustments can be complex but are crucial for maintaining proper basis tracking going forward. Also double-check your partnership agreement for any special allocation provisions that might affect how this distribution should be treated from a book vs. tax perspective. Sometimes the agreement has specific language about property distributions that can impact the reporting requirements.