Filling out personal taxes after a full withdrawal - Form 1040 and 8949
On the withdrawal report, you will see a listing for Tax Basis prior to withdrawal; this is the member's cost basis before any gains or losses are counted for the year.
Then there is the Current Year Earnings/Loss; this is the total of any capital gains/losses, income, expenses, etc. This figure is detailed on the K-1, and is the member's share of gains or losses that happened as part of the club's business during the year. These gains or losses are something most tax programs should ask you to fill in if you indicate that you received a K-1 during the year.
When added together, the Tax Basis Prior to withdrawal and Current Year Earnings/loss, form the member's Adjusted Tax Basis. This is their final cost basis on leaving the club.
The difference between the Adjusted Tax Basis and the Cash Received, is the Realized Gain / loss. This figure, positive or negative, must also be claimed on the member's individual tax forms.
The information about the withdrawal that does not show up on the K-1, will be entered on a form 8949, by the member.
- The most likely location is to include this transaction in Part II for Long-term gains. (Use Part I if you were a member of the club for less than a year.)
- Click HERE for a sample of a form 8949, showing where the entries would be made, assuming the member was in the club for more than a year.
- Check box F to indicate you did not receive a 1099 for this transaction.
- column a - describe the property as <a partnership interest>
- column b - use the date you first joined the club, that is, when you paid your first capital contribution.
- column c - this is the withdrawal date on your Member Withdrawal report
- column d - this is the cash received in the withdrawal
- column e - this is the adjusted basis on your Member Withdrawal report
- columns f and g - leave blank
- column h - the gain or loss from your Member Withdrawal report. Also is difference between column d and column e. (d-e)
Include any other transactions that generated a LT gain for which you received NO 1099 on other lines of this 8949. Report the sums of columns d, e, g and h from this 8949 on line 10 of Schedule D.