Can we treat the sale of a real property with gain sold in an LLC as passive income by the individual partner? The software treats the gain as 1250 and 1231on the K-1

Forum|Forum|9 months ago
September 14, 2025
2 replies
10 views

Why is it capital gain for the members in an LLC.

sjrcpa

Level 15

What was the nature of the real property - rental, business use, investment?

Net 1231 gain is taxed as LTCG on an individual 1040. Follow it from the 4797 to the Schedule D.

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

C

celine389Author

Level 3

I was confused why there were 2 entries on the K-1, one on line 9c and the other one on line 10, same number, 9c is for 1250 and line 10 is 1231. Found out it was an IRS trick to determine from the 4757 whether it should be recapture of depreciation at 25% if depreciation is larger than total gain. I had to explain to my client who does his own 1040, and I do the LLC. All is well. I needed the answer before September 15th, deadline for the LLC. You confirmed my understanding... Thank you very much.

Accountant-Man

Level 13

1250 gain is capital gain, too, just that it is the "recapture of depreciation" piece of the gain that could be taxed at up to 25%, rather than up to 20% for LTCG.

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