unrecaptured 1250 gain
My sister received a K-1 report on her share of a partnership concerning
renting and selling some houses. Her share of an unrecaptured 1250
gain was $5,000. I thought I had to include this on the capital
gains sheet, but the local accountant said you do not need to include
this as a gain. Is he correct?
-- L. Flowers
I am assuming you're doing your sister's return
and not trying to put her income on your capital gains sheet, and
that you need a local accountant and me to resolve this.
Unrecaptured Section 1250 gain
is that portion of your overall gain attributable to straight-line
depreciation allowances, on business or rental real estate. Unrecaptured
Section 1250 gain is taxed at 25 percent, and the remainder of the
gain is usually taxed at the preferential long-term, capital gains
rate of 15 percent.
K-1 is an informational schedule provided to members of a partnership,
to include the partnership's items of income and loss on their respective
tax returns. Partnership income is taxed to the partners, hence
the need for an informational schedule, which is aptly named Schedule
Line 9c of Schedule K-1 includes
that portion of the gain reported on line 10 that should be taxed
at the 25 percent rate. Since the Line 9c amount is already included
in the line 10 amount, you would not add the two together to report
it on Form
4797 Line 2. Instead, you would report the Line 9c amount on
Line 19, after completing the unrecaptured Section 1250 worksheet
that appears on Page D-8 of the Schedule
D instructions. That amount would again figure into the return
when you complete the Schedule D tax worksheet, on page D-9 of the
Schedule D instructions.
If you're trying to do this by hand, I wish
you all the luck in the world.
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