Taxes On Partial Cash Withdrawal

Jay Sternin on

If a partner makes a cash withdrawal of less $$$ than the
amount of they've paid into the partnership, then my
assumption is that it's a non-taxable return of part of
their investment. Is that correct?

If however they withdraw more that their investment, then
that portion of $$$ in excess of their investment in the
partnership is taxable? Correct? Is it long or short term
capital gains or ordinary income?

Thx.......Jay

Laurie Frederiksen on

Hi Jay,

That's close. If a partner withdraws less than his tax basis in the club in cash as of the end of the year, he won't owe any taxes on the withdrawal. His tax basis is the amount he has paid in plus any income that has been allocated to him since he joined minus any expenses and partial withdrawals he has taken earlier.

If he does owe taxes it is long term capital gain if he's been in the club more than 1 year.

Laurie Frederiksen
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On Wed, Jul 16, 2014 at 6:58 PM, Jay Sternin wrote:

If a partner makes a cash withdrawal of less $$$ than the
amount of they've paid into the partnership, then my
assumption is that it's a non-taxable return of part of
their investment. Is that correct?

If however they withdraw more that their investment, then
that portion of $$$ in excess of their investment in the
partnership is taxable? Correct? Is it long or short term
capital gains or ordinary income?

Thx.......Jay

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