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Level 1
posted Apr 15, 2023 11:08:27 AM

Filing Masterworks K-1

I was able to follow the K-1 documents provided by Masterworks for most of the questions but was confused how to answer the following questions during the K-1 process in TurboTax Online:

 

Describe the Partnership (I checked the following):

  • This is a publicly traded partnership.
  • This partnership ended in 2022. (Is this correct?)

Describe Partnership Disposal:

  • Complete disposition (I later chose this -- is this correct?)
  • Disposition was not via a sale
  • Sold and am receiving payments (I originally chose this but saw questions about mortgages and saw no tax impact after)

What type of disposition was this (after checking "complete disposition" above):

  • Sold Partnership Interest (I checked this one since there was a note that said if you are not sure, answer Sold Partnership Interest -- is this correct?)
  • Liquidated Partnership Interest

Enter Sale Information (what values to put for each?):

  • Regular Gain or Loss (Sale Price, Selling Expense, Partnership Basis, Ordinary Gain, 1250 Gain)
  • AMT Gain or Loss (Partnership Basis, Ordinary Gain, 1250 Gain)

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1 Replies
Expert Alumni
Apr 15, 2023 2:54:29 PM

If your Schedule K-1 is marked as a Final K-1, then you have Described the Partnership correctly (and if it's a PTP).  

 

As long as you no longer have an interest in this Partnership it is a Complete Disposal, but you will mark Disposition was not via a sale if you did not sell your investment for cash or a cash equivalent.

 

If the PTP went out of business and your interest became worthless, you will mark Liquidated Partnership Interest and if an actual sale took place you have marked the correct line.

 

Usually, Regular and AMT amounts are the same, unless you are subject to AMT rules and your Partnership basis ends up being calculated differently.  You need to enter the sale information as it happened and your partnership basis (value of the partnership interest before the sale) so TurboTax can calculate the sale.  If you have Ordinary Gain and/or 1250 Gain, your Schedule K-1 will report those amounts.  Report them as they show on your form.