Level 3

Inherited Partnership Interest

Forum|Forum|5 years ago
September 29, 2020
1 reply
15 views

I have a client who inherited a partnership interest in a natural gas company in 2018. Apparently the estate reported all income and paid all taxes in 2018. In 2019 the partnership sold all assets and closed the business. This resulted in an ordinary gain being reported to the estate (and subsequently to my client). No my client still retains an owership in a company that has closed. Is there any way to reduce the ordinary income to account for a step-up in basis of the partnerhsip interest and a subsequently worthless partnership interest. I'm grasping at straws trying to find a way to reduce the tax owed.

Thanks in advance.

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qbteachmt

Level 15

Does Form 706 apply? It has the alternative valuation provision. Had it been longer than 6 months since death and transfer to closing?

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J

jgillespieAuthor

Level 3

I do not believe Form 706 applies, and a separate firm has completed the Trust return, my client has only received a K-1 from the Trust. The assets within the partnership were actually under contract to sell prior to death, but the sale wsa not completed until several months after the death. My client's family member only owned a small percentage in the partnership overall (roughly 3%).

qbteachmt

Level 15

I saw Estate, not Trust, in the original review. Was the asset already in the trust prior to death? Was the trust an "upon death" trust? Did that "inherited" partnership come from the deceased to your client; or through a trust, and not inherited but distributed? Or, not distributed, because it was worthless while still in the trust?

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