1. This is a memo I typed for myself after finally figuring this out. I use Vanguard and thus you should susbstitute your broker's name when you see Vanguard. To enter
capital gains/losses and ordinary recapture on the sale of partnership
interests as reported on brokerage statements and K-1’s, follow the following
instructions: [NOTE: This approach avoids entering
totals received from the broker and then trying to figure out where basis
adjustments etc. reported in the K-1 package go. Make each 1099-B broker statement an EXHIBIT
to attach to the return which reflects the adjusted totals and enter the totals
on the appropriate TurboTax input schedule as indicated below. Although the Exhibit may not be required, I always attach them. [Use the FORMS approach to enter the data
outlined below NOT the EasyStep – which I’ve never used. As a retired CPA who specialized in taxes, I use the FORMS approach.] This is rather lengthy, I suggest you print it out.
2.
FIRST STEP: Enter the K-1
data on the K-1 entry sheet. {Assuming
ALL units are sold} - on the “Final/Amended”
section at the end of Part II, click
on the:
a.
Final K-1
box
b.
Partner sold or otherwise disposed of entire interest box….
c.
Click on the QuickZoom button – then to Part
II Disposition of Partnership Interest
i. Check boxes on
1a and 1a(1)
ii. Enter dates etc on Line 2,3&4.
iii. Enter “0”s on Selling
Price and Basis, line 5 & 7,
at the bottom of the schedule. Do not
enter the actual data here.
3.
SECOND STEP: Go to the schedules in each K-1 package from partnerships sold which show the adjustments to
basis required, and the ordinary income portion etc.
a.
Determine the number
of units sold for Long-term and Short-term transactions respectively from
the Vanguard statements of sales. Draw a
line to separate the two categories. Add
and note total L/T and S/T adjustments.
4.
THIRD STEP: Make a copy of
each Vanguard 1099-B schedule of “Proceeds
from Broker and Barter Exchange Transactions” to become EXHIBITs to reflect the adjustments. Enter each adjustment for each partnership at
the bottom of the schedule for the basis/gain/loss info shown in the 1099-B. The sum of each column is the adjusted amount to enter on the input sheets. The EXHIBITs will be attached to the return. There will generally be four (4)
1099-B’s to reflect:
a.
L/T – Basis
reported to IRS [Box 3] transactions
b.
L/T – Noncovered
securities - basis not reported to the IRS [Box 5]
c.
S/T – Basis
reported to IRS [Box 3] transactions
d.
S/T – Noncovered
securities - basis not reported to the IRS [Box 5]
i. The name for each one should contain the relevant description,
e.g. “Taxpayer Name L/T Basis Reported…” etc which will make it easier to find
each one in the left margin menu in FORMS mode.
5.
FINAL STEP: The totals
after adding/(subtracting) the adjustments determined on the above 4 schedules
will be entered on two different TurboTax Schedules:
a.
Use a separate CAPITAL GAIN (LOSS) TRANSACTION WORKSHEET for
each of the categories listed above – creating 4 different transaction
statements.
i. L/T – Basis
reported to IRS [Box 3] transactions
ii. L/T – Noncovered securities not reported to the IRS
[Box 5]
iii. S/T – Basis reported to IRS [Box 3] transactions
iv. S/T – Noncovered securities not reported to the IRS
[Box 5]
On each one:
????????????v.?Complete the relevant info in Part I.
vi. On Part II,
??????????????1.
Line 4 Company
Name – enter SEE EXHIBIT “x”.
??????????????2.
Lines 5c and d – VANGUARD and a/c number
vii. Part III – enter relevant info on lines 4 and 5
viii.
Part IV – check
boxes on lines 1, 2 and 5b
ix. Part X – this is where the key info is entered for sales
price, cost etc. on lines 4 and 5. On
line 7 “Total adjustment to gain (loss)”
enter the Ordinary Gain as a negative number. [This ordinary piece will be entered as a
positive amount on Form 4797 in the next step].
The adjusted gain should agree with the adjusted gain determined on the
EXHIBIT.
??????????????1.
Note on line 9
the codes can be determined by putting your cursor on the box and click on the
HELP CENTER in upper right. Then click
on “Form 8949 Adjustment Codes” in the popup box. Generally it should be BMO.
b.
On Form 4797 Sales of Business Property
input form, pg1, enter L/T and S/T ordinary income adjustment amounts on two
separate lines:
i. Column (a) Description – enter the name of the EXHIBIT
“x” -ORDINARY.
ii. Column (d) Sales Price – enter the ordinary amount. [no other info is required – only sales price.] These amounts will show up on the two parts
of the Form 4797 which you select in the next steps.
iii. Column (h) indicates whether its short-term [goes in
Part I] or long-term [goes in Part II].
iv. Column (i) – your selection is for Taxpayer or Spouse
ownership.
c.
This should
complete the process. Review Schedule D and Form 4797 to see
that the L/T, S/T capital gains on D
and the L/T, S/T ordinary income
totals are properly reflected and agree with the totals from the EXHIBITs above. If you followed the details above, they should! Good luck.
