Where do I enter sales information for an MLP? I received a Sales Schedule on my K-1 but I also received a 1099-B from my broker.

[Aquarius5]

My K-1 has a sales schedule with several line items, these are the various unit groups that I have sold, effectively ending my partnership. When I go to the K-1 section in turbotax, it asks if I have disposed of any units, but only allows me to enter 1 line item. However, on my sales schedule have about 6 line items, 6 different sales. I have no idea how to figure out my cost basis as 1 line item from the sales schedule.

My other question is what do I do about the sales of these units that are reported on my 1099-B? Do I also have to add them as reported sales of stocks section of turbotax? If so isn't that duplicating entries?

[ChristinaS]

You want to notate the sale of the MLP in the K1 section, but you will report the real numbers in the 1099-B section of the program.

You may have suspended Passive Activity Losses, and these are "released" in the year of disposition. If you don't enter indicate that you disposed of the partnership interest within the K1 entry, you may lose out on suspended losses. That being said, put $0s for the sales price and cost in the K1 portion of Turbo Tax, as the real info should be reported in the (publicly-traded) stocks, bonds section via the 1099-B.

In the 1099-B section under Wages and Income, Stocks, Bonds and Mutual Funds, you will put the data from the 6 sales. Did you sell them all on the same day and purchase all of your units at least 1 year before the sale date? If so, you can likely combine as "Various" purchase date and 1 sales date?

How are the sales reported on the 1099-B? 6 line items? Or is it more succinct and less confusing? Do you know your basis for the entire interest as a whole?

[Aquarius5]

Unfortunately it's a mixed batch of 6 lots purchased and sold at different times. I have good records for my purchase and sales price for all of them. However, my understanding is that the true cost basis is calculated based on the Sales Schedule in my K-1, not what my brokerage reported. In the sales schedule they have filled in the columns for

(5) Cumulative Adjustments to basis (some of these are negative and some are positive)
(7) Ordinary Gain
(9) Alternative Minimum Tax Basis Adjustment

So for example one of my line items on the sale schedule is when I sold 455 units and I need help figuring out my actual cost basis to report on the 1099-B as you suggest:
(3) Sales proceeds: 500
(4) Purchase amount: 10,000
(5) Cumulative Adjustments to basis: -2500
(7) Ordinary Gain: 600
(9) Alternative Minimum Tax Basis Adjustment: -162

[ChristinaS]

Your cost basis on the 1099-B (if its there) may be incorrect, but you still report the sale in the 1099-B section and merely indicate disposal within the K1 section itself. The reason the 1099B is usually not complete is because the basis is impacted by income and loss per the K1 forms while you had owned the units. Cumulative adjustments to basis suggests losses on K1, which lower your basis. However, the numbers you typed don't make too much mathematical sense. $7500 basis (10k less 2.5k) sales process of $500 resulting in gain of $600?

[Aquarius5]

No, the $600 Ordinary Gain was not a result of my calculations, it is the value provided by the MLP in the "Ordinary Gain" column on my sales schedule. I'm supposed to use this as part of my calculation to get my actual cost basis to report on 1099-B? This confuses me. I still don't know how to calculate my actual cost basis so I'm pasting the information from my K-1 below....


Information Provided by Partnership
Column (1) - Units Disposed: This is the number of units you sold as reported to us by your broker or our transfer
agent. If this number is incorrect, you should contact Tax Package Support at 800-203-5179.
Column (2) - Disposition Date: This is the date you sold units as reported to us by your broker to our
transfer agent. If this information is incorrect, you should contact Tax Package Support at 800-203-5179.
Column (5) - Cumulative Adjustments to Basis: This represents the cumulative amount of income, gains, losses,
deductions, credits and distributions allocated to these units since your purchase, which either increase or
decrease your original tax basis in these units.
Column (7) - Ordinary Gain: If you have ordinary gain, a Section 751 Statement must be attached to your tax return. See the enclosed List of Tax Reporting Items and Definitions
for recommended statement wording.
Column (9) - Alternative Minimum Tax Basis Adjustment: Your gain, if any, should be adjusted by this amount for
alternative minimum tax purposes.

Information from Your Records
Column (3) - Sales Proceeds: Enter the total amount you received from the sale, net of any commissions.
Column (4) - Purchase Amount: Enter the total amount you paid for the units including commissions. If you
acquired the units by some means other than purchase (such as inheritance), please contact your tax advisor.
Calculation of Gain or Loss(-)
Column (6) - Total Gain or Loss (-): Total gain or loss is determined by subtracting the amounts in columns (4)
and (5) from the amount in column (3).
Column (8) - Capital Gain or Loss (-): Subtract the amount in column (7), if any, from the amount calculated in column (6).

[nexchap]

I'll add another answer to this separately, so its not buried in these comments.  The problem with this answer is that it doesn't address how to handle the Ordinary Gains.  Entering 0 for sales and 0 for cost is not right.

[taliesinii]

I, too, am facing a similar situation, with the sale of shares in an MLP.  The only difference is that 1) I sold them all at once, and 2) there was an overall loss, even though some small amount of ordinary gain is listed.  I want to enter everything in it's correct place, but want to make sure I'm not double-entering something.

[nexchap]

See the answer to this question, which is similar:  <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/votes/11315903?notification_token=961494f328b004232914f0459c04369e">https://...>

[Boyan]

So it sounds like we import both 1099 and K1 and then only adjust the K1 part manually with $0 for cost basis and proceeds so the real numbers end up on the return sourced from the 1099?

[nexchap]

I haven't tried importing any K-1's for 2018 returns yet, but in the past the import process was less than fulfilling:  it didn't import the Sales Schedule info, and it didn't match the new K-1 to any prior year K-1 (important for suspended passive losses).  And for complicated K-1s (multiple entities, entries on lines 1,2,3) it didn't handle that.

So I've always manually entered the numbers.  It really doesn't take that long.

[nexchap]

TT does not provide helpful instructions on how to handle MLP sales.  This has been an issue for years.  But bottom-line, the K-1 interview section of TT is flawed, for the reasons below:

1) Partial sales:  In these cases, the capital gains/losses must be fully recognized.  However, if you enter them during the K-1 interview they're treated as passive and suspended (for cap losses) or used to release past years suspended losses (for cap gains).  Neither is correct.

2) Mixed short/long sales:  The K-1 interview only allows one holding period.  There's no way to split between long and short term gains/losses

3) Complete dispositions, all in one holding period:  This is the only case where the K-1 interview works, but you still have to deal with the 1099-B that came in from the broker.

4) Simply following the advice that pops up on the TT forms to enter 0 for sales and 0 for cost basis goes haywire as soon as you try to enter the Ordinary Gains that always arrive with a MLP K-1.

Because of all this, I handle all scenarios the same way:

1. Use the K-1 interview for the 'ordinary gain' portion of the MLP sale, but not the capital gain/loss.  Do this by: 1) enter 0 for sales proceeds, 2) enter the ordinary gain numbers provided on the K-1.  Note that there will be two ordinary gain numbers, one for Regular and one for AMT, and 3) set your basis as the inverse of the ordinary gain (for example, if ordinary gain was 100 (regular) and 90 (AMT), set basis as -100 (regular) and -90 (AMT).  Doing this puts the ordinary gain into all the right spots on your tax return, but sets the capital gain/loss as $0 for both Regular and AMT.
   
2. Go the the 1099-B provided by your broker.  There will be a cost they provide, which isn't reported to the IRS.  This can be changed, so change it to whatever provides the correct cap gain/loss (you work out the cap gain/loss by using the K-1 worksheet).

As to the specifics of your calculation, in the case where you had:

(3) Sales proceeds: 500
(4) Purchase amount: 10,000
(5) Cumulative Adjustments to basis: -2500
(7) Ordinary Gain: 600
(9) Alternative Minimum Tax Basis Adjustment: -162 

Your basis for this particular sale is $7500 (10,000 - 2,500).  Your sale proceeds are $500.  So your total loss on the sale is $7000 (500-7500).  However, in any MLP sale a portion of the transaction is treated as ordinary income (taxed just like wages), and a portion is treated as cap gains/losses.  So the $7000 loss is going to be broken into two parts:  ordinary gain (the piece taxed like wages) and capital gain/loss (all the rest of it).

In step 1, you'd use $600 for regular ordinary gain, and $448 for AMT ordinary gain (600-162).  Per my instructions above, you'd enter 0 for sales and -600/-448 for cost basis.  Since you have multiple lots, you'd simply use the total ordinary gain rather than the per lot info.

In this case, for step 2, you have a cap loss of $7600.  This is calculated so that the total of your ordinary gain + your cap gain/loss equals the 7000 loss from above ( 600 + -7600 = -7000).  Since your 1099-B will show the $500 sales revenue, you'd enter $8,100 as the cost basis.  This gives you the $7600 loss (500-8100).

It all seems complicated, but when you step back and look at what makes it onto the tax return, you'll see the $600 showing up on form 4797, and from there to your 1040 line 14.  You'll see the -$7600 on your Sched D, and from there to your 1040 line 13.  And, assuming you had suspended losses from prior years, you'll see them pop up on Sched E, and then on 1040 line 17. 

[Boyan]

Can you run a scenario where the K-1 import file (the .txf download from TaxPackage Support) and the brokerage 1099 (directly imports over the Internet) are both automated and not a manual data entry. Where does one need to manually adjust? I imagine one of the two needs adjusting ONLY meaning you let both import but just touch the K1 part and let the 1099 stay as the data came in? Thank you

[nexchap]

See the comment left above....

[nexchap]

The instructions provided by TurboTax in this area are inadequate.  Here's a link to a similar question, that provides some detailed instructions:  https://ttlc.intuit.com/votes/11315903?notification_token=961494f328b004232914f0459c04369e

[LaJolla]

 nexchap I deeply appreciate all the information you have provided given that this is such a complex issue. My K-1 Sale Schedule (SS) has significantly more boxes then other indicated and I believe it actually provides me with the amount I should enter as my Total Adjusted Cost Basis for this sale on my 1099B/SchD. However, just to ensure the stars all aligned, I went through the all the steps you previously outlined in your posting and I did get the same numbers as my SS. However, since no one has previously mentioned that their SS included this information I just want to ensure I was not missing anything. (I’ll provide the figures from my K-1 and calculations below my next question.

Secondly, Due to the complexity of my 1099 Div/INT/B from my broker I had to import this information into TurboTax and unfortunately when Schwab sold all my shares of my MLP they did do in 4 lots; therefore, I just wanted to ensure I can just proportionally adjust each lot’s cost basis so that the sum of all lots equals the Total Adjusted Basis for Capital Gain/Loss Purposes.

My K-1 Sales Schedule shows the following information:

Total Number of Units Sold (Column 1) 204

Purchase Dates (Column 2) K-1 shows: Various

Sale Date (Column 3): 8/5/2020

Sales Proceeds (Column 4): K-1 blank, $2572.34 on 1099-B

Purchase Amount (Column 5):  $8979. 

The below amounts are provided by the Partnership

Cumulative Adjustments to Basis (Column 6):  -$7043

Total Adjusted Basis (Column 7) :  $1936

This amount is calculated by combining your Purchase Amount in Column 5 and your Cumulative Adjustments to Basis in Column 6.

Section 751 Gain (Column 8- Ordinary Income). Form 4797 line 10, Column G : $3893

Total Adjusted Basis for Capital Gain/Loss Purposes (Column 9): $5289

 (Calculated by adding ordinary gain column 8 to adjusted basis column 7).

Percentage Long Term Capital Gain/Loss (Column 10): 100%

Sale proceeds. Long Term Capital Gain/Loss (Column 11). Form 8949 Part II. Long Term Column D. K 1 blank, calculated amount $2572.34

Sale proceeds. Short Term Capital Gain/Loss (Column 12). Form 8949 Part I. *Long Term Column E: K-1 blank, calculated amount 0

Adjusted Basis: Long Term Capital Gain/Loss (Column 13). Form 8949 Part II. Long Term Column E. $5829

Adjusted Basis: Short Term Capital Gain/Loss (Column 14). Form 8949 Part I.  SHORT Term Column E: $0

Alternative Minimum Tax Basis Adjustment (Column 15). Form 6251 line 2K. -$20

AMT ordinary gain is: $3873

To adjust my Cost basis on my 1099B I  followed your example designated “step 2” and did the following:

Total Adjusted basis: Purchase price/Cost- Cumulative Basis Adjustment (8979.45 -7043) = 1936.45 (same information on SS column 7)

Total Gain: Proceeds- Adjusted basis (2572.34-1936.45) = 635.89 (not on SS)

Capital Gain/Loss: Total Gain-Ordinary Gain (635.89 -3893) = -3257.11 (not on SS)

Basis for Capital Gain for SchD: Proceeds- Capital gain/loss (2572.34 – (-3257.11)  = 5829.45 ( This is essentially same as amount on SS column 9 Total adjusted basis  for Capital gain Loss Purposes)  (.64918142 of original cost)

Due to the complexity of my 1099 Div/INT/B from my broker I had to import this information into TurboTax and unfortunately when Schwab sold all my shares of my MLP they did do in 4 lots; therefore, I assume I can just proportionally adjust each lots cost basis so that the sum of all lots equals above Basis, but I just wanted to make certain.

1. 100 Shares Cost 4404,  Proceeds 1260     Adjusted Basis: 2858.99
2. 54 Shares Cost 2366. Proceeds 680          Adjusted Basis: 1535.96
3. 50 shares Cost 2202, Proceeds 630          Adjusted Basis: 1429.50
4. .164 shares Cost 7, Proceeds 2                 Adjusted Basis: 4.55        

(Original Cost: 8979, Proceeds: 2572          Adjusted Basis: 5829.45

Thanks so much