Kea Posted February 21, 2013 Report Share Posted February 21, 2013 Client was a member of a partnership for a few years. Things started falling apart and he was not able to get a K1 for a few years. He was finally able to get out of the partership and it has since been dissolved completely. Nobody seems to be doing anything to get the partnership returns completed. How do I show client's investment loss? There's no K1 showing his "capital account." Report on Sch D with $0 selling price and an acquision price of his initial investment (and any subsequent investments)? He has K1s from the first 2 years he was in the partnership but not the last 2. Thanks Quote Link to comment Share on other sites More sharing options...
grandmabee Posted February 21, 2013 Report Share Posted February 21, 2013 WOW, with the penalities today for each partner each month he is going to have a expensive problem. Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 21, 2013 Report Share Posted February 21, 2013 Sounds like the first step would be to have him call whoever was in charge and tell them the penalties per partner and see if he can get anything moving that way. Is there any provision under state law regarding involuntary dissolutions? Quote Link to comment Share on other sites More sharing options...
Kea Posted February 21, 2013 Author Report Share Posted February 21, 2013 I doubt he would have any luck. One of the partners was being completely uncooperatve about everything and that was why he was originally trying to get out. Then a couple of months ago, the "sane" partner (client's term) finally told the other one that it was over. The problems are much deeper than tax returns. I was just trying to find out if I could help him write off his losses. Quote Link to comment Share on other sites More sharing options...
jainen Posted February 21, 2013 Report Share Posted February 21, 2013 >>if I could help him write off his losses<< The problem is, he doesn't HAVE any losses from a pass-through entity. Even though he got out, he can't establish a basis without adjustments for income, distributions, and so on. It's probably time to ask a lawyer to send a friendly reminder. Quote Link to comment Share on other sites More sharing options...
Elrod Posted February 21, 2013 Report Share Posted February 21, 2013 Agree with Jainen. This happened to me years back and I sent client to a lawyer.......Problem solved. It cost them, but remember....."You get what you pay for." Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 21, 2013 Report Share Posted February 21, 2013 Although I agree he needs a lawyer, I don't agree that he does not have a loss if he can tell you what his loss is. I would take an estimate and file his tax return with his knowledge that it would need to be adjusted later. Client should be told that filing a partnership return is just as much his responsibility as his partners. Get a lawyer to force a handover of the books and records of the business. Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted February 21, 2013 Report Share Posted February 21, 2013 I just get uncomfortable with the idea of signing and filing a return that you know for certain is not correct or at least do not know for certain that it is correct with the data in hand. With the client's knowledge that it would need to be adjusted later? I wouldn't do that. The attorney route, in my opinion, should be first. At least with actual books and records one could then have real data on which to base the return. 1 Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 21, 2013 Report Share Posted February 21, 2013 >>With the client's knowledge that it would need to be adjusted later?<< Well... an estimate return would avoid many of the penalties at least for simply not filing! Why would a tax preparer want their client to pay large penalties? Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted February 21, 2013 Report Share Posted February 21, 2013 While I would not want a client to pay large or small penalties, I am not aware of any option to file an estimated return other than for estimated taxes. I suppose that one could sign the preparer declaration that it is based on all information of which the preparer has any knowledge (bottom of 1040). I wouldn't do it knowing that there exists information that would materially affect the return. I still think the attorney option should be exercised first. YMMV Quote Link to comment Share on other sites More sharing options...
grandmabee Posted February 21, 2013 Report Share Posted February 21, 2013 i WOULD be more worried about the partner penalty per month for the first 12 months than I would be about the 1040 penalty. he can always file extension with a payment. Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 21, 2013 Report Share Posted February 21, 2013 When a client comes to you with estimate and actual tax information for 5 or 6 years past due tax returns, you have to accept the clients information to file those tax returns. After all, it is the clients tax return and you are supposed to be a professional preparer working for the IRS. Quote Link to comment Share on other sites More sharing options...
jainen Posted February 21, 2013 Report Share Posted February 21, 2013 >>you are supposed to be a professional preparer working for the IRS.<< Are you sure this is what you meant to say? Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 21, 2013 Report Share Posted February 21, 2013 >>Are you sure this is what you meant to say?<< What else can one say with all the new preparer penalties and preparer rules? Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 21, 2013 Report Share Posted February 21, 2013 I am with OldJack on this one. Had to do the same thing with a client a while back. Put an explanation on the return that the K-1 never arrived, the TMP was not taking our calls, and that we estimated the amounts and would amend if the K-1 shows up. Not a peep from the partnership or the IRS....yet. But if it comes, we amend and go forward. Tom Hollister, CA Quote Link to comment Share on other sites More sharing options...
Kea Posted February 22, 2013 Author Report Share Posted February 22, 2013 Yep, I agree as far as handling the lack of K-1. We had to do that last year. I just was wondering if there was something I needed for showing the "sale" / "ending" of the partnership - such as selling an investment on Sch D or maybe Form 4797? Quote Link to comment Share on other sites More sharing options...
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