![]() ![]() There seems to be a common misconception that ordinary income is recognized only to the extent of gain, much like a depreciation recapture in an asset sale. 751 refers to the ordinary gain from the sale of unrealized receivables and substantially appreciated inventory. 751, or "hot asset," ordinary income, which is discussed in more detail in Milo, " The Tax Cost of Hot Assets Upon the Disposition of a Partnership Interest," The Tax Adviser (August 2010). Many PTP sales disclosure schedules include an ordinary income component. Fortunately, most PTP Schedules K- 1 include additional schedules with the necessary information. So the cumulative basis adjustments must be made to properly report the gain or loss. When the investment is sold, the Form 1099- B, Proceeds From Broker and Barter Exchange Transactions, that reports the sale shows the original cost. ![]() The brokers do not normally see the annual Schedules K- 1 and do not have the information to adjust the cost basis in the client's account records. Just like other partnerships, the basis of the investment in the PTP is adjusted each year by income, deductions, and distributions. Most clients purchase their investment in a PTP through their stockbroker or other financial adviser. The task is particularly challenging in the year of sale. Properly reporting information from Schedules K- 1, Partner's Share of Income, Deductions, Credits, etc., for publicly traded partnerships (PTPs) is a difficult task. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |