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K-1 Question/The tax burden seems high.

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  • K-1 Question/The tax burden seems high.

    Ok, setting aside "Please seek tax advise from a professional" for a moment, could someone give me a quick and dirty explanation of the K-1 numbers? The Capital Gains look really high (but not in a good way )

    Here's the just of it for our personal 2019 tax year:

    We received 108K from Eastham III in distributions

    Of that, 56K is designated "return of capital"

    Our K-1 indicates a Capital Gain("line # 10, "net section Capital Gain") of 93K

    Plugging the number into TurboTax, we we get approx 90K of Taxable Income

    That's not nice. Is this basically right?

    Seems like quite a tax liability. Are we not able to net the "return of Capital" against the gain?

    Comments?

  • #2
    Re: K-1 Question/The tax burden seems high.

    a "return" is not a "gain." say you give me $100 to buy something [as your agent, let's leave out my fee]. i sell it for $150, which i give to you. then $100 is a return of capital, a return of what you gave me at the start. $50 is a capital gain, i.e. it is income. you have the benefit that long-term capital gains [i assume it's long term] are taxed at a lower rate than ordinary income.

    if you got 90k of taxable income, celebrate. [some of that might be recapture of depreciation deductions in prior years, but you got the benefit of that depreciation lowering your taxable income in those earlier years]

    Comment


    • #3
      Re: K-1 Question/The tax burden seems high.

      Thanks so much for the insight JK. Perhaps it is recapture.

      If anyone from Eastham monitors this thread, I wonder if you might be willing to chime in. (I double plus recognize your thought do not constitute tax or investment advice).

      Anyone else have some thoughts?

      Comment


      • #4
        Re: K-1 Question/The tax burden seems high.

        Originally posted by touhy View Post
        Ok, setting aside "Please seek tax advise from a professional" for a moment, could someone give me a quick and dirty explanation of the K-1 numbers? The Capital Gains look really high (but not in a good way )

        Here's the just of it for our personal 2019 tax year:

        We received 108K from Eastham III in distributions

        Of that, 56K is designated "return of capital"

        Our K-1 indicates a Capital Gain("line # 10, "net section Capital Gain") of 93K

        Plugging the number into TurboTax, we we get approx 90K of Taxable Income

        That's not nice. Is this basically right?

        Seems like quite a tax liability. Are we not able to net the "return of Capital" against the gain?

        Comments?

        Mostly I agree with jk. I would reach out to Eastham directly for help in reconciling your calculation, which would suggest $52k in capital gain ($108k minus $56k), with the K-1, which indicates a $93k capital gain. I'm guessing that the K-1 is correct and jk's interpretation is correct, but it couldn't hurt to ask Eastham for an explanation.

        Comment

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