MLP and PTP reporting K-1 and 8949. Do I report the sale of partnership stock (K1 sold all shares) if it was reported as a profit against my losses on my brokerage 1099B.

[alanpariser-1]

Thanks for your summary of how to input PTP sales in TT. I have only two questions:

1. Entering either a cost basis change in Form 8949 Column E or as a gain adjustment in column G causes TT to throw an error check and disallows electronic submission. Math gives the same answer either way, but TT says that either way is an error.  Is this the way it is supposed to be??  I don't remember this happening in prior years.

2. "Some other things. Look at lines 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."   Not sure what this means. Yes, line 20AB on the K-1 is equal to the ordinary gain on the K-1 sales schedule. Where do I add this?? There is a QBI schedule included in TT showing historical QBI's. Any help appreciated.

[ddinh]

Take me couple days to find how to it correctly.

For 8849 correct Cost Basic + Cumulate Adjustment to Basic (mostly negative number) + Ordinary Income

That the cost basic use for 1099-B

You $10,000.00 when purchase the stock and sold for $15,000.00

K1 Cumulate Adjustment to Basic  -($3000.00)   Ordinary Income or gain $5,000.00 

AMTGAIN/LOSSADJUSTMENT  -($300)

$10,000 + -($3,000) + $5,000  = $12,000

When enter 1099 -B  1e $12,000.00

Select "cost basic incorrect or missing on my 1099-B

K -1 Enter Sale Information.

Sale price  $0

Partner basic -($5000)  ATM Gain/loss $300

Ordinary gain $5000   ATM Gain/loss -($300)

It should do it.

and enter all the info for K-1

When get to Describe Partnership 

Select passive activity loss from last year

All my investment at risk.

Go back to all the previous K1 - from PTP you sale add all number from line 1 and enter it.

It should balance the gain sale stock and received capital gain from PTP, might be a little different. 

Hope this help. good luck.

[ddinh]

If you have ET (Energy Transfer) check the second page of K-1 for correct amount for some Line 1, 2, 10, 17A, 17B, 20 ect.......

Because K-1 included USAC and SUN.

[alanpariser-1]

Thanks for the tip. I have processed PTP sales in the past, so I had a pretty good idea as to how to proceed. My problem was how to enter the cumulative cost basis adjustment onto the capital gains calculations.

Here is how I proceeded:

1. Use the step by step to enter all the K-1 values into TT, including those on the K-1 sales Worksheet. When done, navigate to the forms view of the K-1 and scroll down to the box that says “I sold some shares”. Make sure it is checked. Click on the Quick Zoom box, and another sheet opens up. It directs you set revenue and cost = 0 (lines 5 &7). When you do this, the correct Ordinary Income from the K-1 Sales sheet gets transferred to form 4797 as regular income. TT also enters this same amount as a negative value on a new 8949 form!! This adjusts Cap gains to eliminate the Ordinary income that is reported on the 4797. So far, so good!!
2. Now you only need to adjust Cap gains to account for the cumulative cost basis adjustment from the K-1 Sale Sheet. The Ordinary Income adjustment as been done for you. The K-1 instructions say to enter the adjusted cost on form 8949 column E. The TT instructions on the K-1 QuickZoom says to “Enter the 1099-B transaction on Schedule D…”. Both instructions are tax-wise correct, but neither can readily be accomplished in TT. I couldn’t find any way to adjust Schedule D.

In the past, I had adjusted the 8949 as recommended by the K-1 sales Sheet. It had worked OK. This year, these adjustments (over rides) were flagged by TT as errors and stopped use of E-File. Something may have changed in the system??

After looking around a bit, and as you suggested adjusting the 1099-B transaction, I found that you can’t update the 1099-B directly (mine was electronically downloaded weeks earlier and had a boatload of transactions), but you can go to the Capital Asset Worksheet attached to the 1099-B, and then locate the transaction in question. A Double Click (see the notes on the Capital Asset Worksheet) on the transaction, and an “adjustment window” opens, allowing you to add an adjustment amount, a code for the adjustment (I used “B”), and an explanation. Perfect!! This transfers all the information to the 8949 as required, and no error flags!! For some reason, also had to click the Multiple transaction box for the changes to take effect, but that’s ok, I summarized several transactions and entered the entire adjustment on one transaction.

One thing to remember is the K-1Worksheet says to enter the cost basis on the 8949, but you are actually entering a Gain adjustment in TT. No revenues or cost basis numbers in the 1099, etc. change. There is simply a Gain adjustment included in the adjustment field. The sign of the gain adjustment will be the opposite of the Cost adjustment on the K-1.

One other thing to look out for. I found that the K-1 Cost basis and the 1099-B cost Basis prior to any adjustments are not always equal!!!  I contacted TaxPackageSupport and found that they use an average cost basis for unit sales and spread a sale over all units in the account. Your broker could use FIFO, LIFO or some other method, but probably not an average basis. So if you had previously sold shares, the two bases will be forever different. I had this problem on one set of transactions. Others came out OK – The two cost bases were identical … 1099 - B = K-1 Sales Sheet.  I believe the K-1 basis is the correct one (the 1099-B shows the date in section E – not reported to the IRS, since they are not necessarily correct), so you may need to add this adjustment to the K-1 sales Sheet adjustment to get the correct total adjustment, since the 1099-B is starting with the wrong cost. As before, check the sign of what you are adjusting - you are adjusting the gain to account for the different cost basis starting point.

Whew!! It does work, but the instructions in TT are very obtuse; it may be good tax advice, but rarely address how to do what is needed.

Thanks again for the tip on adjusting the 1099 – that’s what steered me in that direction.

[Bruce52]

Where is the "PTP" box?

[Mike9241]

if it's a PTP Publicly traded partnership) box D of part I will be checked. if you're asking about Turbotax what version are you using. for online you'll need premier version for desktop any will do.

under wages & income, scroll down to business items. click on "start" or "update" on the line that says schedules K-1.

click "start" or "update" on the line that sys "Partnerships/ LLCs)

if the partnership name isn't there click on "add/add another" or "update"

enter name, ID #, and address if needed click "continue" 

on next page choose "the type of partner" if it's owned by a retirement plan nothing should be enter on your 1040. the trustee may have to file form 990T so will need the k-1. if this is not the case click "continue"  

next page for a PTP check the LLC member box and the click "continue"

next page check "domestic" of "foreign" and click "continue"

continue on to following pages (for example nothing needs to be enter on the percentage share page, liabilities page. or capital account page because they're not used by Turbotax 

you eventually arrive at the "describe the partnership". The first line should be checked if it's a PTP. 

do you know how to enter any ordinary gain on disposition, if any, that' would be reported in box 20AB of k-1 and on the supplemental sales schedule and how to enter the correct tax basis on form8949 (it's not on the broker's statement) 

[schultzdonna]

@Mike9241 Thank you for the detailed instructions. Do they still apply to TT 2024?

Also, I am at the "Now for the 8949" section of your instructions.  I am not sure where to enter the info.  In TT, am I manually changing what was imported from the Schwab Brokerage file, and then check the box that says "The cost basis is incorrect or missing on my 1099-B"?

My K-1 info:

-Sales price and ordinary gain is $2111.  

- Sales schedule purchase price = $6660 (which is the same as what is on the 1099-B)

- Sales schedule Cumulative Adjustments to Basis = $2010.

Form 1099- B info:

1d - Proceeds: $7729.75

1e - Cost Basis: $6660

Realized Gain: 1069.75

Thank goodness I sold this. It is such a hassle at tax time.

[PatriciaV]

Yes, you need to report your adjusted basis, not what the broker reported.

Per @Mike9241:

The correct tax basis is:
What you paid originally, should be the same as what is on 1099-B as cost,
Then there is a column on the sales schedule that says cumulative adjustment to basis. If it’s positive add it to the original cost. If it’s negative subtract the amount.
Finally add the amount of ordinary income reported above, if any.
The result is your corrected cost basis for form 8949.

Note that the process posted for tax year 2022 is still valid for tax year 2024.

@schultzdonna

[Mike9241]

only the $2111 gets reported in the sale section of the K-1. do not report the 1099B here you will create issues for yourself

Schwab should have coded them as type B (short-term) or E (long-term) uncovered which simply means Scwab did not report the cost basis to the IRS

if the cumulative adjustment to basis is a positive 2010

then your tax basis for schedule D/8949 based on what you provided 6660 + 2010 +2111. If my math is correct that's 10181 so a sales price of 7730 produces a capital loss  2451

if the 2010 is negative  tax basis is 6161 for a capital gain of 1569