Level 2

Question

Showing owner investment

Forum|Forum|3 years ago
July 20, 2022
2 replies
8 views

Just wanted to make sure I am showing this correctly on my client's return. We're filing a 1065 for a partnership that purchased a building. The building is worth 855,000 and the partnership was required to put 201,000 out of pocket down on the purchase. Since the partnership ONLY holds the building, The 201,000 would be a start-up cost and amortized over 15 years, correct?

ProConnect Tax

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sjrcpa

Level 15

No.

I assume they got a loan for the remaining purchase price of the building?

The more I know the more I don’t know.

I

IATSDAuthor

Level 2

That is correct

sjrcpa

Level 15

At the moment of purchase, Your Balance Sheet would show:

Real Estate Asset $855,000

Mortgage payable 654,000

Partners Capital 201,000

The more I know the more I don’t know.

qbteachmt

Level 15

It helps not to use the word "worth." Take it one fact at a time.

They put money into the Partnership.

That's now an Asset = money. There is no Cost for that. It's just money. Nothing was bought or sold, yet. And there is nothing to amortize or depreciate. It's still there, as money. They didn't start anything, yet; there are no activities.

Then, they bought a building, so one asset (money) turned into another (Real Estate) and there is debt for the balance owed. That is Cost, or Basis, in the building. Not "worth."

And make sure to separate assets by class: Building, Land, outbuilding, improvements (parking, fencing?). That total Cost bought stuff and there it is, invested in that stuff.

Don't yell at us; we're volunteers

I

IATSDAuthor

Level 2

Thank you, this is what I was looking for. So regardless in proconnect, I just put the building (no land) in to depreciate the 855000 and the 201k as owners capital on the balance sheet distributed between the 4 partners, correct?

sjrcpa

Level 15

You have to separate the land and building components of the 855,000.

I was simplifying.

The more I know the more I don’t know.

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