Sale of Real Estate Tax Shelter

Apr 13, 2008 3 Replies
R

This is actually planning for 2008 taxes :-)



A few weeks ago, an apartment building in which I was a Limited Partner (since the early 1980's) was sold.



I am looking for assistance, or reading references, to try to figure out my tax liability.



There will be a gain, and I have no unused passive losses.



There was an initial investment; and there have been distributions, over the years, of a portion of that initial investment.



Information distributed last year by the partnership indicated that my net gain would be the sum of: Distribution of the (remainder of) the net cash invested Distribution of the proceeds of the sale of the property Less The capital account amount on my K-1 (tax basis)



That part is clear and I can do those calculations easily enough with the actual data.



But on that breakdown, they also show a portion of the gain being taxed at



25% (the bulk of the gain); and a smaller amount of the gain being taxed at
15%.

I can't tell, from the information provided, how they are determining that breakdown.



Any suggestions would be appreciated.



Thanks.



--ron



========================================= MODERATOR'S COMMENT:



- why not ask them as well?


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R

You mean the return of capital (first line above) is taxable?

Gain or loss on business property is taxed at 25%. If some of the capital was invested in stocks, maybe it would be taxed at 15%. Not sure though.

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1

now, there's a thought!

I would imagine the 25% would be on depreciation recapture and the 15% would be on capital gain beyond that.

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R

To Moderator: I have put in a request to them for that information, but I have found it often takes quite a while to get back a response.

With respect to "remove-ps" note, I believe it is not that the return of capital is directly taxable, but rather that its return alters the basis.

With respect to "123go", I believe what you write makes sense, but I am having trouble reconciling the depreciation numbers provided and the calculations made. There clearly is gain over and above the amount of depreciation taken.

However, in the "Gain" computation (for the total project -- not just my share), one of the items is "Accum Dep". This is $4.363 million. But in the tax computation, there is an item for Taxes @ 25% on $4.2 million or $1,050,000. There is another item for Taxes @ 15% of $33,577.

The numbers don't add up to the calculated gain (about $36K short).

I suppose I'll just have to wait until the Developer responds.

--ron

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