MLP & Form 4797 not generated

[Mitzy20]

Hi,

This is my first year using TT.  Prior to this year, a CPA did my taxes.
I own units in an MLP - oil & gas pipeline. I received a K-1 and entered all information into TT per the instructions. , In 2019, Form 4797 was generated  and included an amount from Box 10 on the K-1 (loss).

This loss was added to the loss for my small business on Schedule C and the total entered on Line 7a (other income from Schedule 1) on  my 2019 1040 SR.

But TT did not generate Form 4797 for 2020, yet I also have a loss in Box 10 on the 2020 K-1.
Can someone let me know - do I need Form 4797 and how do I get TT to generate it?

Concerned.

Thanks in advance.

[Mike9241]

by definition with an MLP ordinary losses (lines 1 through 3) and 4797 losses are passive and can't be used to offset other income.  if in 2019  there was ordinary income on lines 1 through 3, the 4797 loss up to the amounts on those other lines would be allowed (net effect zero). if both sets of lines showed losses, your CPA messed up. if in 2020 those lines are losses are all losses they are suspended until you either have enough income in future years to offset the losses or you dispose of the MLP. 

[Mitzy20]

I assume you are talking about lines 1- 3 on the 2019 4797?

There is no gain - only a -44 loss.

This loss is coming from Box 10 on the K-1

So I still have the same question:

I also have a loss in Box 10 (net section 1231) of the 2020 K-1 (-92).

So - do I need Form 4797?

Thanks again

[Mitzy20]

I understand they are suspended - but why didnt the form generate?

TY

[Mitzy20]

Hi -

Maybe I didn't give complete information on how the loss was shown in 2019, which may give you a better picture.

My schedule C (small business) had:

-796 loss  (unrelated to the K-1)

-44 loss from Box 10 on the 2019 K-1.

-44 was reported on Form 4797.

The total was carried to the 2019 1040 Line 7a.

This year -

I also have a loss on the 2020 Schedule C (unrelated to the K-1) and -92 loss from Box 10 on the 2020 K-1.

Form 4797 did not generate.

Only the business loss on Schedule C (unrelated to the K-1) carried forward to the 1040.

I need to know if I entered something incorrectly and need to get 4797 to generate.

[tagteam]

If the only loss on your K-1 is on Line 10 of your K-1, then Form 4797 will not be generated.

The foregoing assumes you do not need Form 4797 for other transactions (apart from the MLP).

[Mike9241]

the form doesn't generate because it's suspended and therefore none of the 4797 loss flows to the 1040. the purpose of that form is to detail the allowed 4797 loss. 

[Mitzy20]

Thank you for your patience.

In addition to Box 10, the K-1 shows negative numbers in Box 1 (ordinary business income or loss) and in Box 20 (Other information - Code V). 

I entered all of this into TT.

[tagteam]

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@Mitzy20 wrote:

In addition to Box 10, the K-1 shows negative numbers in Box 1.....

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If you enter a positive number in Box 10, you should see Form 4797 generate.

[Mitzy20]

Thank you!

I appreciate very clear answers (as yours is), as I am a novice as far as these more complicated tax forms go.

Not sure why my CPA last year had these forms (4797 and the 6198) generate when they do not apply...

[Mitzy20]

I have owned shares in an MLP since 2007. I have to say honestly that I don't know whether this has been a good investment or not  - it has appreciated in value and has thrown off income AND losses over the years, but I think I need to evaluate how this has impacted my bottom line from a tax perspective, because I don't know.

How are gains from the K-1 treated? Do they add to ordinary income? What about losses? From earlier in this thread there is discussion about losses going into 
"purgatory" (i.e., accumulating) until such time as they can be used.

Can I only apply passive losses against passive gains from this MLP?

Thanks in Advance.

[tagteam]

Yes, suspended passive losses from the MLP can be used to offset passive income but that is about it.

Otherwise, suspended passive losses are not released until you dispose of your interest in a taxable transaction (e.g., sell your interest).