Partenrship dissolved, inventory distributed

[joanmcq]

Partnership had a stall in antique mall to sell antiques. Business was not that great and when main partner got sick, they went out of business, and donated the inventory to goodwill. (I really, really want to shop at this Goodwill; the one partner claims it is the Saks of Goodwills, very rich neighborhood). So I have 4 reciepts from goodwill for the same date with thousands of dollars of antiques (about $26000 worth), as well as some personal items. Truth of matter is , they said they closed p'ship and then donated the items, although it may just mean they closed the store, and then donated. Putting this stuff on the 1040 will be a huge red flag, as well as there being a problem with a lack of appraisals, although is a 'morris chair' a similar item as an 'oil painting', or 'persian rug'. the reciepts are not grouped in any fashion, and one has 5 pages of items attached. The way I'd like to do it is to have it flow from the K-1; less messy and a lot less 8283s. What do you all say? and if I put it on the partnership, do I reduce the inventory by the amount donated as 'items withdrawn' in the COGS calculation?

[OldJack]

Well... are you implying that you are going to ignore the taxpayers statement that it was a donation by the individuals and just prepare the return as you want to do it? Are you really willing to accept the possible consquences of such an act? Do you have good malpractice insurance? Do you represent taxpayers before the IRS and do you want to continue? Then by all means go ahead and do it your way since the taxpayer will tell the truth on IRS audit.

[joanmcq]

Jeesh old jack, I know I know. And I gave them the rules for donations...I just wish they had stuck a bunch of the stuff in the garage until January. If they had called me, that's what I'd have said. I still don't know how to break up a Sch A donation that has two names on it and the items are owned 20/80 though. do I split the total value of each donation or item 20/80, or somehow distribute the items approx 20% to partner B and 80% to partner A? D'ya see why I wish it was a partnership distribution? Not to mention I still am not quite sure as to figure out what is a similar item and what is not.

And the kicker is that the 80% partner really will get very little tax benefit because his income is so low...without itemizing his tax is wiped out by the child tax credit and he gets EIC and ACTC besides. The 20% partner has a huge COD problem (see other post below), as well as most of the income.

[OldJack]

Well... check with the partners again and ask them if they didn't mean that the partnership made the donation. I know... why didn't I say that in the beginning. I was just making a point that you have to have the client tell you what they did or intended to do and follow that. Just because they closed the doors would not keep the partnership from making a donations and incurring expenses to wind-up the business before filling out the partnership tax return. Of course the end result in dollars deduction is the same on the 1040 as donations are a pass thru. You could just take the list and attach to each partners 1040 with prorating it by percentage at the bottom of the page, but then if you efile that is a different problem. no big deal.