Discussion:Death of a partner

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Discussion Forum Index --> Tax Questions --> Death of a partner


Dlmiller (talk|edits) said:

22 February 2007
A partner passes. How does his spouse report the partnership interest on her tax return? For example, does she take his ending capital account as her basis in the partnership? Is the difference in what she received and his capital account reported as a capital gain on schedule D? Of course the partnership is cash basis. Does she back out the amount of cash she received from the cash in the bank. Wouldn't this have already have flowed through the income statement and be in his capital account?

Kevinh5 (talk|edits) said:

22 February 2007
the partnership issues a K-1 up to date of death to the deceased, and a K-1 to the new owner (estate or beneficiary) for the remainder of the partnership's tax year. There are some special elections that can be made on the partnership level to step up the decedent's share of assets to FMV. This will not affect the decedent's K-1, but will the successor's.

Dennis (talk|edits) said:

22 February 2007
When a partner dies, his or her partnership earnings subject to SE tax are figured through the end of the month in which the death occurs. This is true even though the decedent's estate or heirs may succeed to rights in the partnership. The partnership earnings subject to SE tax for the year are treated as though they were earned in equal amounts each month. Publication 541

Dlmiller (talk|edits) said:

22 February 2007
The final K-1 was issued to the deceased patner in December 2005. We filed a final return for the partnership for 2005. The spouse was paid for what they thought was 1\2 of the value of the partnership in Jan 2006.

Kevinh5 (talk|edits) said:

22 February 2007
By who? The surviving partner?

If so then this is a Sch D transaction with a basis = FMV of the partnerhip interest at DOD.

Dlmiller (talk|edits) said:

22 February 2007
The surviving partner.

Thanks for your assistance.

Tdoyle (talk|edits) said:

February 24, 2007
Dennis:

I'm not seeing a Publication 533 on the IRS website. Is this the correct number? Do you have a link to it?

Thanks!

- Tim Doyle, TaxAlmanac Moderator - Talk to me 12:30, 24 February 2007 (CST)

CATAXES (talk|edits) said:

24 February 2007
Partnership owns single asset (fully dpreciated bldg), collects rents. 1 Partner dies and his partnership interest passes to marital trust. Is there any change in accounting at the partnership level?

Deback (talk|edits) said:

February 24, 2007
I think Dennis meant Publication 541. I fixed the link.

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