Discussion:Worthless Partnership Interest

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

(Difference between revisions)
Jump to: navigation, search
Revision as of 19:15, 20 October 2009
R2 (Talk | contribs)
(An abandonment l)
← Previous diff		 Revision as of 19:36, 20 October 2009
Michaelstar (Talk | contribs)
(Fully agree - th)
Next diff →
Line 39: Line 39:
Also, the capital account reconciliation does not make sense. Why would there be a $35,000 balance in the capital account? There may be COD issues here as well.}} Also, the capital account reconciliation does not make sense. Why would there be a $35,000 balance in the capital account? There may be COD issues here as well.}}
 +
 +{{ForumReplyPost|UserID=Michaelstar|Date=20 October 2009|Text=Fully agree - that is where the $380 presents the problem - certainly if this is actually recourse debt.}}

Revision as of 19:36, 20 October 2009

Discussion Forum Index --> Advanced Tax Questions --> Worthless Partnership Interest
Discussion Forum Index --> Tax Questions --> Worthless Partnership Interest

Wamark (talk|edits) said:

20 October 2009
My client invested in a partnership as a limited partner to buy and develop land. In 2008, the bank foreclosed on the land. The partnership dissolved in 2008 and my client lost his entire investment.

He received a 2008 K1 from partnership that shows:

  • Marked as final K1
  • Ordinary loss of $35,000
  • Partner’s share of recourse debt $380
  • Partner’s ending Capital Account $35,000

I don’t understand the accounting on the final K1. It seems like his capital account should have been reduced to zero thru a loss.

Regardless, I want to take an ordinary loss for the remaining balance in his capital account for a loss on his worthless interest.

In researching the subject it seems that the requirements are pretty strict to be able to do that.

Given the entries on the K1 can I take an ordinary loss for a worthless partnership interest in 2008?

Michaelstar (talk|edits) said:

20 October 2009
Based on the K-1 you received and your post - my answer would be No - you will not be able to take an ordinary loss for this ending capital account. See Rev. Rul. 93-80.

Wamark (talk|edits) said:

20 October 2009
Thanks Michaelstar.

Yes, I read that.

To be clear I assume you say no because of the releif of $380 of recourse debt?

Michaelstar (talk|edits) said:

20 October 2009
Unfortunately, yes. The recourse debt of $380 presents a problem. Also, there would need to be a formal abandonment as I read the Revenue Ruling.

R2 (talk|edits) said:

20 October 2009
An abandonment loss is not available if the partner is relieved of debt as part of the abandonment. Not sure if partner was relieved of debt.

Also, the capital account reconciliation does not make sense. Why would there be a $35,000 balance in the capital account? There may be COD issues here as well.

Michaelstar (talk|edits) said:

20 October 2009
Fully agree - that is where the $380 presents the problem - certainly if this is actually recourse debt.
Retrieved from "http://www.taxalmanac.org/index.php/Discussion:Worthless_Partnership_Interest"