USO ETF Partnership K-1

[Sue45]

Help please, please ! I am not sure am I understand it correctly or not.
For my sale of the share, on my K-1, purchase price /initial basis amount: $200, cumulative adjustments to basis: $180, cost basic: $380. 

on my 1099B: 1d-proceeds&6-reported Gross: $450, cost or other basis: $250, Gain or loss: $200. 

so the real cost basis is purchased price $200+ cumulative adjustment $180 = $380? And I should replace the cost basis $250 at the 1099B with $380? 
And my real gain is: sale price $450 — purchase price $200 — cumulative adjustment $180 = $70. And I should adjust the 1099B also? 

[nexchap]

@Sue45 Based on the numbers you included, you've got it right.  Cost of 380 and gain of 70.  As a double check, looking at it more practically, you paid $200 originally and sold for $450.  So you had a profit of $250.  Over the time you owned the partnership, you should have paid tax on that $250.  So the $70 showing up on this year's 1099-B is only part of the picture, and suggests that the partnership reported $180 in income over the years that you already paid tax on.

[Sue45]

Now I understand the cumulative adjustments to basis better. Even I didn’t sell the shares last year, but there was gain value, and I had to pay tax for that. So, that $180 actually is gain adjustment because I paid tax last year already. So now I suppose just owe tax for the part that I never had paid tax before. 
Now, I just need to adjust my 1099B, right? I finished input my K-1 in TT, didn’t ask me about sale price or purchase price.

by the way, thank you so much for the reply! I read all your reply and learned so a lot! You definitely save my day, THANK YOU! 

[Sue45]

One more question, please!

on K-1, it said 100% sale is long term, why TT splits my sale into 40% short term, and 60% long term? Do I need to adjust that also? 
Thanks a lot! 

[nexchap]

@Sue45 Does your K-1 entries include straddle income (section 1256 contracts)?  This is typically on line 11C.  If so, straddle income is taxed as 40% short term cap gain, and 60% long term cap gain.  But items reported on the K-1 itself are different than what you report for the sale of a partnership:  a) your personal gain/loss on the sale of your partnership interest is reported on 1099-B (and is 100% long-term), but b) anything reported in the K-1 entries themselves (like a straddle) is your share of income/deductions that the partnership is passing to you, and which you pass directly onto your return.

[Sue45]

@nexchap Yes, the K-1 income is from 11C, contacts and straddles. Now I know how it is being taxed.

Because I didn’t sell all my shares, so my K-1,11C shows $210. And my understand is these are the taxable increase value, which is going to be part of the cumulative adjustments for next year if I sale some shares. Am I right? 

Thanks a lot for the huge help! 

[nexchap]

@Sue45 Yes -- Cumulative adjustments to basis are allocated proportionally to the shares you sell, so if you didn't do a complete sale some of those adjustments won't be applied until future years.

[MGuercini]

My USO fund experience a bit more (maybe a lot more) complicated. I bought $16000 of USO fund through my Schwab brokerage account in early 2020 and I sold everything in early 2022 for $22000.  Here are the numbers for three years from Schedule K1's. I will be ignoring the several small amounts (less than $200) on three  K1 schedules and present you only the large amounts (rounded to nearest $100 for simplicity):

K1 2020 Box L values: Capital contributed $16000, Current year net loss -$6400, Ending capital account $9600. Box 11 Other loss (code C)  -$6400

K1 2021 Box L values: Beginning Capital account $9600, Current year net income $6600, Ending capital account $16200. Box 11 Other income (code C)  $6600

K1 2022 Box L values: Beginning Capital account $16200, Current year net income $5800, Ending capital account $22000. Box 11 Other income (code C) $5800.

2022 Sales Schedule from USO is showing Cumulative Adjustments to Basis of $6000 and Cost Basis of $22000.  However, Schwab 1099A is showing $16000 basis and $6000 capital gains.                                     

I think I am going to have to amend 2020 and 2021 returns, because I had ignored the lose in 2020 and the gain in 2021 thinking that I didn’t sell any shares in 2020 and 2021. Yes, I made a mistake. Now I am trying to do my 2022 taxes. What is my taxable gain for each of three tax years 2020 through 2022? I will never buy a LP fund again. I didn't know USO was LP fund until I saw the postings here. Please help!

[nexchap]

@MGuercini Like you said, you'll need to amend 2020 and 2021 to report the K-1 values.  TT will take care of figuring the tax liability once you add the forms.  A couple things to keep in mind:

• After you do 2020, check to see if there are any suspended losses created (there will be a worksheet for the partnership that will show you).  If there are, you'll want to bring them into your 2021 file when TT asks you if you have any suspended losses.  Normally, this would happen automatically when you import your previous year file, but since you're amending you'll have to do it manually.  If you've already completed 2022, you'll have to do the same for 2021 suspended values.
• Your broker 1099 will have the wrong cost.  They don't see the K-1.  So when you report the sale you'll change the cots to $22,000 (or whatever the K-1 tells you).

[blueaggue]

Hello, I read this post and I think it's very helpful. Thank you. I still have a bug which is based on very similar question. 

Background: my husband bought and sold UNO in 2023, and he received 1099b and schedule K-1. There are two 1099b, one is non-covered securities, with cost basis reported in form 8949. The sales price is 43,849, and cost basis is 43915. With some wash sales, the gain is $1,808. The second1099b is aggregated loss on contract for 1256 contracts, and the total P/L is -429. The K-1 shows -2,372 in 11c. In the sales schedule, the initial basis is 43,283, the cumulative adjustment to basis is -2,423, and the cost basis is 40,860.

I think I should report both K-1, 1099b and 1256. In form 6781 line 1 I reported -2,372 from K-1 and -429 from 1099b. Is this correct?

In the 1099b, should I adjust cost to 40,860?

Checking schedule K-1 (form 1065) in TT, I have keyed in everything but in Section C: "Income and Loss Reported on Sched E" Column h (Loss K-1) under the non-passive category, there is no number in it. I am not sure what is wrong. It means the losses were not deducted, right?