TAX IMPLICATIONS:
The transaction will be a taxable event for Magellan unitholders and will cause ONEOK to have a step-up in tax basis approximately equal to the aggregate purchase price of Magellan units and Magellan debt assumed (approximately $18.8 billion). The premium and cash portion of the consideration may assist with potential tax implications for Magellan unitholders occurring from this transaction. This transaction is expected to defer significant corporate cash tax liability into future periods for the combined entity.
https://ir.oneok.com/news-and-events/press-releases/2023/05-14-2023-232007760
also see
https://www.barrons.com/articles/magellan-midstream-oneok-tax-hit-stock-9de13555
so it seems that you treat the merger as a sale of MMP for the cash and Fair Market Value of OKE on the date of the merger
your K-1 package should contain a supplemental sales schedule as to tax basis and portion of gain to be reported as ordinary income
here is standard reporting for sale of a publicly traded partnership.
hope the following helps - total disposition only
MLP and PTP reporting k-1 and 8949/1099-B
Enter the k-1 info
Check the PTP box
If total disposition then:
Check final K-1 (s/b marked on actual k-1)
Check sold or otherwise disposed of your entire interest
On the k-1 disposition section for sales price use the ordinary income. It would be reported in box 20AB of K-1 and a column on the sales schedule. Sometimes you’ll see a column with the “751” or the words “Gain subject to recapture as ordinary income” or similar wording on the sales schedule. The following is for the k-1 sale section - not the 8949/schedule D
Sales Price = line 20AB (1065 k1)
* Selling expenses = 0
* Basis = 0 (zero – nothing else)
* Gain is computed and should be the same as the sales price.
* Ordinary gain = enter the same amount as the sales price
* Other lines should be zero
This amount flows to form 4797 line 10 and is taxed as ordinary income. This step is necessary, so any suspended passive losses are now allowed assuming complete disposition.
Some do not understand the above. The 1099-B (capital gain/loss portion) reporting is not done in this section in Turbotax. Doing so will result in reporting the sale twice if you enter the 1099-B info.
Now for the 8949/1099-B Capital gain/loss reporting
The broker’s form is probably coded as B or E – sales proceeds but not cost basis reported to the IRS. This is because the broker does not track the tax basis. It used what you paid or was adjusted due to a merger or acquisition but does not reflect the k-1 activity.
The correct tax basis is (note that your sales schedule may have a column that reports the adjusted/average tax/cost basis excluding the ordinary income which must be added):
What’s on the sales schedule as purchase price/initial tax basis (usually column 4).
There is a column on the sales schedule that says cumulative adjustments to the basis. If it’s positive add it to the cost shown. If it’s negative subtract the amount. Some sales schedules do the math for you and have a column titled something like adjusted cost basis
Finally, add the amount of ordinary income reported above.
The result is your corrected cost/tax basis for form 8949 – the capital gain/loss portion.
Read the info provided at the top of the schedule about what the columns represent.
Some other things. Look at line 20AB. That number should be added to the ordinary income above for reporting the 199A (qualified business income from the PTP). You don’t have to enter this but then you lose out on a tax deduction = 20% of this amount.
