What this line means
Your share of long-term capital gains or losses from partnerships, S corporations, estates, or trusts. These amounts appear on the Schedule K-1 you receive from the entity. The entity determined the holding period — these are gains from assets the entity held for more than one year. Your share is taxed at your individual long-term capital gains rate.
Does this apply to you?
- You are a partner in a partnership that sold assets held more than one year
- You are a shareholder in an S corporation that reported long-term capital gains on your K-1
- You are a beneficiary of an estate or trust that distributed long-term capital gains to you
- You invested in a real estate syndication, venture capital fund, or private equity fund structured as a partnership
Easy to overlook
K-1 Box 9a is not the only place long-term gains appear Long-term capital gains from pass-through entities can appear in K-1 Box 9a (net long-term capital gain), Box 9b (collectibles gain at 28%), and Box 9c (unrecaptured Section 1250 gain at 25%). Each has different tax treatment. Filers who report only Box 9a miss the separately stated items. 1 IRS Schedule D instructions — Line 11
Basis limitations on pass-through losses If the K-1 shows a long-term capital loss, you can only deduct it to the extent of your basis in the entity. If your basis has been reduced by prior-year losses or distributions, the current-year loss is suspended until you restore basis. Your broker or tax software does not track this for you. 2 General filing pattern — missed K-1 long-term capital gains
Watch out for this
Filing before receiving the K-1 and omitting the long-term capital gains. Partnerships and S corps routinely issue K-1s after April 15, especially if they file on extension. If you know you are a partner or shareholder, file your personal return on extension rather than filing without the K-1 income.
Footnotes
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IRS Schedule D (Form 1040) Instructions, Line 11. https://www.irs.gov/instructions/i1040sd ↩
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IRS Schedule D (Form 1040) Instructions. See also IRS Publication 17, Your Federal Income Tax. https://www.irs.gov/pub/irs-pdf/p17.pdf ↩