Where can I file the partnership cash distribution from MLPs?

[SweetieJean]

Did you receive a K-1?

[TomYoung · Accepted solution]

Generally, you don't.

MLP's are pass through entities.  That means the MLP does not pay tax in its own name.  Instead, it passes through to the partners all income and expenses, irrespective of cash distributions.  The mechanism for this pass through is the Schedule K-1.  Partners take information off that Schedule K-1 and enter the various items of income and expense on their own income tax returns.  (The TurboTax Schedule K-1 interview takes the information and places it on the necessary Forms or Schedules appropriately, for the most part.  You should also understand that passed through income increases your basis in the partnership while losses decrease your basis.)

Cash distributions from the partnership to the partners are not, typically, events that partners have to report in their own income tax returns as they generally are considered "returns of capital", i.e., a reduction in each partner's basis in their partnership basis.  If at some point the cumulative cash distributions exceed your adjusted basis in the partnership that would be reported as a form of capital gains.

Tom Young

[tonioturbo1]

Thank-you very much Tom. How do I do the TurboTax Schedule K-1 interview? I don't find any menu related to this in Turbo Tax. Thanks - Antoine

[DoninGA]

To enter a Schedule K-1

• Click on Federal Taxes (Personal using Home and Business)
• Click on Wages and Income (Personal Income using Home and Business)
• Click on I'll choose what I work on (if shown)
• Scroll down to Business Items (Business Investment and Estate/Trust Income using Home and Business)
• On Schedule K-1, click on the start or update button

Or enter k-1 in the Search box located in the upper right of the program screen.  Click on Jump to k-1