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» From: Mesa, AZ Hi Tax Mama! I have had an REIT since 1985 which closed out last year. I was able to write part of it off until the tax laws changed. Now it closed with my receiving a partial write off and a cash distribution which is approximately $2,000 less than I paid for it. My K-1 statement lists an ending capital balance of $956 and a statement that I may be able to write this off. What forms do I use and how do I calculate a write off? Thanks. Mark Hi Mark, Take this to your local friendly tax pro. While your K-1 may show one basis, YOU might have another, depending on what you were and were not able to right off over the years. Answering you blindly like this won't help you get it right. Also, I don't know if the ending balance on the K-1 was before or after the final distribution. You may have loss; but you might have a gain --- since you've been taking write-offs all the years of the investment. Remember, during the time you owned it, you got distributions, depreciation deductions and losses that you were able to deduct. (That's one of the reason for buying REITS, the deductible losses. The other is, many REITS over a steady cash flow.) Your tax basis is figured as follows: Start with your investment - say $10,000 Deduct the money distributed to you over the years, say $1000 x 15 years (since 1985) -15,000. Deduct the depreciation/losses you've taken, say about $2,000 per year x 15 years -30,000 Add in the profit from the sale of the property. Let's say 36,000 ---------- That would leave you with a basis of about $ 1,000 similar to the capital balance on your K-1, right? Well, there may have been some years when your income was too high to let you use those write-offs. So, your basis might actually be several thousand dollars higher than they show on the K-1. You see, the REIT managers do not know what you're filing on your tax return ... So, you may have a loss. Best wishes, Eva Rosenberg Click Here for TaxMama's Honor System |
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