I've read several posts on this and still a bit confused - mostly around TT not handling K-1s very effectively. The K-1 interview "Enter Sales Information" screen seems to indicate that TT will handle reporting correctly without the need to enter the sale(s) via a 1099-B. Some posts seem to indicate that entering a 1099-B with an adjusted cost basis is also required (and will avoid duplicate reporting) in addition to the K-1 interview. I bought and sold all shares of a publicly traded MLP in 2022.
Via the K-1 interview - "Enter Sales Information" screen, I entered the following:
Sales Price: $X (as total proceeds from sale(s) found on my Brokerage statement)
Partnership Basis: $Y (as reported in the K-1 Sales Schedule as "Cost Basis")
Ordinary Gain: $Z (as reported in the K-1 Sales Schedule as "...Recapture as Ordinary Gain)
Do I also need to enter a separate 1099-B for this sale?
Thank you so much!
@dpreas2017 In certain circumstances, TT will give you the wrong tax results if you enter the sale information on the K-1. You have to use the 1099-B from your broker to manage the cap gain/loss. Only use the sale worksheet on the K-1 to enter the Ordinary Gain.
Unfortunately, if you enter the Ord Gain on the sale worksheet, you have to make sure that entry doesn't create its own Cap Gain/Loss. So enter $0 for sales, and enter the inverse of the Ord Gain for basis (both 'Regular' and 'AMT', since the Ord Gain is different for both). This will result in the K-1 calculating $0 for Cap Gain/Loss.
As an example, if the Ord Gain is 100 'Regular' and 97 for AMT, you'd enter -100 and -97 on the basis line.
@dpreas2017 Nothing on the K-1 itself is used to adjust the 1099-B. You're only using the numbers provided on the "Sales Schedule", which the K-1 preparer includes with the K-1 in the year's when you sell.
Your sales schedule will show a "Cumulative Adjustments to Basis". You add that to your starting purchase price. If you happen to have Ordinary Gain reported on the Sales Schedule, you'd add that too. So as an example:
Purchase Price = 100
Cumulative Adjustments = -33
Ordinary Gain = 20
Basis on the 1099-B - 100 + (-33) + 20 = 87
I had a similar question earlier where the OP said that both were reported on a1099B as well as K-1 and this duplicated his/her income. I advised the OP to report the K-1 and not the 1099B but after reporting the K-1, to make sure that the information is reported as an investment sale on Schedule D and/or the 8949, if one is generated.
If so, do not report it as a Schedule B because it will duplicate the income.
@dpreas2017 In certain circumstances, TT will give you the wrong tax results if you enter the sale information on the K-1. You have to use the 1099-B from your broker to manage the cap gain/loss. Only use the sale worksheet on the K-1 to enter the Ordinary Gain.
Unfortunately, if you enter the Ord Gain on the sale worksheet, you have to make sure that entry doesn't create its own Cap Gain/Loss. So enter $0 for sales, and enter the inverse of the Ord Gain for basis (both 'Regular' and 'AMT', since the Ord Gain is different for both). This will result in the K-1 calculating $0 for Cap Gain/Loss.
As an example, if the Ord Gain is 100 'Regular' and 97 for AMT, you'd enter -100 and -97 on the basis line.
@nexchap Thank you so much for your response. I still have a question about how to adjust the cost basis reported in the 1099-B via K-1 information. So that I understand the full process you are recommending, the script of your example will look like this:
Via the TT K-1 interview - Enter Sales Information screen:
Regular Gain or Loss:
Sales Price: 0 (this will be reported to TT via the 1099-B)
Partnership Basis: (-100) (inverse of the Ordinary Gain listed in the K-1 sales schedule)
Ordinary Gain: 100 (as reported in the K-1 Sales Schedule as "...Recapture as Ordinary Gain)
AMT Gain or Loss:
Partnership Basis: (-97) (inverse of the AMT Gain/Loss Adjustment listed in the K-1 sales schedule)
Ordinary Gain: 97 (as reported in the K-1 Sales Schedule as "AMT Gain/Loss Adjustment")
Then, I will enter the brokerage 1099-B information for the sale in TT. The cost basis reported in the 1099-B must be adjusted by the amount listed in the K-1 considering the following:
Question: For the 1099-B cost basis adjustment, is the K-1 loss/gain reported in box L under "current year net income (loss)" OR in the K-1 Sales Schedule under "Cumulative Adjustments to Basis"? For me, these two numbers are different.
@dpreas2017 You adjust the 1099-B using the Sales Schedule. Assuming your Sales Schedule reports "Cost Basis" and "Gain Subject to Recapture" (Ordinary Gain) your cost on the 1099-B would be the sum of those two entries.
Note that "Cost Basis" is just the total of what you paid for the stock plus "Cumulative Adjustments to Basis".
@nexchap Thanks for your response. I entered the MLP sales as discussed in this thread. The 1099-B shows these sales as "Short-term transactions not reported to the IRS", which I noted in TT.
Upon completion for the 1099-B entry, TT requests that I upload a copy of the 1099-B for submission to the IRS. Should I be concerned that the 1099-B cost basis reported in TT does not match the cost basis in the 1099-B provided to the IRS? Is there a way around this?
@dpreas2017 I'm not sure I understand this last bit: "Upon completion for the 1099-B entry, TT requests that I upload a copy of the 1099-B for submission to the IRS." Didn't you get a 1099-B from the broker? You edit the cost on that 1099-B, so you shouldn't need to create a brand new one.
The broker's 1099-B should be coded B or E: revenue reported to the IRS, but cost not reported.
As for costs not matching, no need to be concerned. The broker can't figure out your correct cost because they don't have the K-1. If there's ever a question from the IRS, you'll have the records of what you paid and the K-1s with the adjustments.
@nexchap I think I may have this wrong in my script:
I just read that for a loss, you need to subtract the amount of the loss from the 1099-b (i.e., 1099-B cost basis + (- K-1 loss)); for a loss shown on the K-1, adjusted cost basis from the 1099-B will be lower. Can you please confirm? I don't want this wrong in the thread for others.
@dpreas2017 Nothing on the K-1 itself is used to adjust the 1099-B. You're only using the numbers provided on the "Sales Schedule", which the K-1 preparer includes with the K-1 in the year's when you sell.
Your sales schedule will show a "Cumulative Adjustments to Basis". You add that to your starting purchase price. If you happen to have Ordinary Gain reported on the Sales Schedule, you'd add that too. So as an example:
Purchase Price = 100
Cumulative Adjustments = -33
Ordinary Gain = 20
Basis on the 1099-B - 100 + (-33) + 20 = 87
Thanks everyone! This thread has been very useful but I still have some questions.
When I will change my basis on 1099B wouldn't I end up paying taxes on any dividend distribution received from partnership? As those are the biggest chunk of the cumulative adjustments... But, I'm already reporting these in the 1099-div from my broker...
In your example, in my case the -33 are the dividends I received (also in past years) , reported in last year 1099 div and again this year.
Am I looking at this wrongly? Do I need to adjust my cumulative adjustment to basis to not include those values if reported elsewhere?
Thanks for any help
@desperado The "cumulative adjustments to basis" reported on the K-1 come from three places:
So there won' t be any double-counting as long as your broker / K-1 provider didn't make a mistake. If you believe you actually reported and paid tax on your dividends (just because they're on the 1099-Div from the broker doesn't mean you paid taxes -- the 1099-Div can also report cash disbursements that were treated as return of capital), and that your K-1 provider also included them in your basis adjustments, you'll want to get one of them to fix their records and reissue your statements.
Thanks @nexchap . You are right, I didn't pay taxes on those dividends last year. I guess my time has come for those....
My next issue is this: I got the new cost basis from the PTP but it refers to all my shares which were on two different platforms and for different lengths (short/long), how do I figure out how to change those basis costs? Can I just wing it, based mostly on divvies, as long as total matches the PTP total? Does it really make any difference, other than the obvious long/short?
@desperado You shouldn't need to estimate anything, since the sales schedule will tell you which lots are sold, and how much is short/long. Note that there's an IRS Ruling 84-53 which says that "a partner has a single unified basis in their Partnership interest". That means that all shares, regardless of when acquired, have the same basis. To make that happen, a sale of shares is treated as though you sold proportionally from each lot (so if you sell 60% of your shares, the partnership treats it as a sale of 60% from lot 1, 60% from lot 2, etc). They then give you the long/short % to use in adjusting your 1099-B.
Following this thread. Very useful.
Question - My Sales schedule has a cost basis column which is the sum of the purchase price and sum adjustments. I assume I would use that column amount and add the ordinary income column to modify the 1099B?
Question - My sales schedule also has a column 12 - unrecaptured section 1250 gain amount of $295. What do I do with this amount? Do I enter it as is to the question 1250 gain for both regular and AMT? Do I need to make any adjustments to the 1099B or other forms for this amount?
@dkmein Yes on the first question. On the second, re 1250 Gain, you should probably post a separate question. I haven't dealt with TTs handling of 1250 Gain beyond seeing the spot to enter it during the interview (the row below Ord Gain on the Sales Worksheet), so I don't know if it creates any problems, or if it needs to be factored into the 1099-B calcs.
Hi,
do the brokers HAVE to report it as B or E? Ameritrade correctly reported as B and E (same partnership, different sales) but Robinhood reported as D (same partnership). I contacted them about it and they didn't want to change the 1099B, saying "we cannot know what it has to be" and "just use K1", and "we don't even actually report it to IRS".
Did I need them to report it correctly? Or can I just change basis, (as I did) and now it will show on taxes as an adjustment... while the Ameritrade ones correctly only show the amended basis, but no adjustment (in column g in form 8949)? Judging from note on form 8949 I should be ok, but double guessing myself now...
Thanks all
@desperado Brokers have no way to know the correct cost since they don't receive the K-1, so there's no way for them to correctly issue a 1099-B with codes A or D. But a broker who says things like "we cannot know what it has to be" and "we don't even actually report it to IRS", when they've just issued a 1099-B that literally says they're reporting cost to the IRS, is probably not going to grasp this. Ideally, talk to someone else with a better grasp of tax reporting to get a corrected 1099. If they refuse, keep good records (perhaps document the issue with Robinhood in writing, so you can produce that later). You still need to make the correction, but if they IRS ever ask about the discrepancy you'll have an easy explanation.
@desperado @nexchap I'll provide what I did if helpful. With the guidance from Nexchap, using the K-1 provided from the MLP, I completed the TT K-1 interview, noting the sells (ordinary gains/AMT) as provided in the K-1 sales schedule and entered the cost basis as the inverse of the amount provided.
In my case, by broker provided a 1099-B as NOT reported to the IRS, with an incorrect cost basis. Using the TT 1099-B interview, I added the MLP sales as short-term (in my case) NOT reported to the IRS. Right or wrong, I chose to enter the sales shown in the 1099-B, and then to add an adjustment to correct the cost basis per the K-1 sales schedule noting that the cost basis is incorrect (from the list of reasons in the TT adjustment screen). The reason I chose to use the adjustment option is that TT requires that you attach a copy of the 1099-B NOT reported to the IRS to conclude the 1099-B interview, stating that the IRS needed it. I figured it may make more sense to the IRS to see that an adjustment was made compared to the 1099-B, although I'm not too sure how the adjustment entry was ultimately recorded in my final 1040.
This thread has been extremely helpful, thank you @nexchap and everyone for weighing in! If I understand correctly, assuming the sale is listed as "Cost basis not reported to IRS", you would fill out these details in the K1 sale information...
In the box "Sale price", this is obtained off the 1099
Partnership basis is the "cost basis", box 6 (sum of box 4 and 5)
Ordinary gain, is transferred in as Box 7
It appears the AMT Gain or Loss column, it automatically transfers the partnership basis over.
In mine, I have a number in box 8 (AMT Gain/Loss Adjustment), do I need to add that number to box 7? Or just leave it as what is reported in box 8?
I also have 2 additional boxes with the headline "adjusted for bonus depreciation" and again 2 sections "cumulative adjustment to basis" & "ordinary gain", where do I report those?
@stevew7 You don't want any Cap Gain/Loss information in the K-1 sale information. The sales price is $0, and the Cost Basis is the inverse of the Ord Gain. When you go to the next screen, where it summarizes your gain on the sale, it'll show $0 Cap Gain.
You account for the cap gain over in the 1099-B interview, by adjusting the cost there.
On your other questions
- Add the AMT adjustment to the Ord Gain to figure the AMT amount
- The bonus depreciation adjustment only applies to the state return, and only in states that are 'non conforming'. You can google to determine if your state is non conforming. If so, bonus depreciation is handled differently but how to enter the adjustments will depend on the specifics of the state (and is outside my expertise).
Thanks @nexchap . Are you saying, on my 1099-B, if the stock purchase was 10,000 for example, and my sales schedule says my cost basis is 5,000, I should be editing that in the 1099-B section? Do I check the box that says "The cost basis on my statement is incorrect" and then write 5,000? Or should I just edit it on the main sale page where the number is imported/entered in box 1e?