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?
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?
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
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?
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).
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.
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.
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://ttlc.intuit.com/votes/11315903?notification_token=961494f328b004232914f0459c04369e</a>
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?
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.
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:
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.
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
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
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.
(Original Cost: 8979, Proceeds: 2572 Adjusted Basis: 5829.45
Thanks so much
I do not know why TurboTax has not updated how it handles the sale of MLP units. A prior contributor offered a solution which works for me, so here again "
On the MLP (K1) screen, show partnership ended, and that you disposed of your units by a sale. Further on the screen asking for sales and basis, enter zero for basis, enter the ordinary gain or loss in that box, and enter the inverse reported gain amount in the basis box
So an ordinary gain of 240 is entered in the basis box as -240. The end result is that the gain goes on form 4797
AND there is nothing that will duplicate the information on your form 1099 B from your broker that goes on form 8949.
On your entry from your broker statement for the sale of the MLP enter the total sales revenue, and the cost as shown,
and check the box below for incorrect basis. When the correct basis screen comes up enter a basis that will result in the correct capital gain or loss based on your sales worksheet calculations. You may want to provide a supplemental statement to explain this code B adjustment.
Then there is also the issue that the K1 interview assumes that sale took place in one time period, without providing for short term and long term sales. But that is not necessary since the 1099 B will have that information reported as
code B for short and code E for long since neither basis is reported by the MLP to the IRS. So you have to adjust the Code B basis to reflect short term capital gain or loss and ditto on code E.
All of the above has been posted previously by another contributor. I am only repeating it for those who did not read the original. But my question is. WHY IS THIS NOT BUILT INTO THE PROGRAM ITSELF. THIS WORKAROUND HAS EXISTED FOR SO LONG THAT IT IS TIME TURBOTAX MADE IT PART OF THE PROGRAM. !!
Marvin could you please clarify to whom you are responding to, since your reply was under my comments, but your comments does not appear to apply to my situation or answer my question.
I was wondering where you are getting the "240" from. In your comments you mention the "ordinary gain of 240" should be entered on basis box as -240 is a theoretical since the early example provided by "giveittome" and answered by "Next champ" she had ordinary gain (600) and 90 (448) . In the my case my it appeared to me that my ordinary gain should be $ -3257.11 (Capital Gain/Loss: Total Gain-Ordinary Gain (635.89 -3893) = -3257.11) and I was hoping that Next Chap would be kind enough to look over my numbers to make sure I followed his stepwise approach correctly. Thanks
I made a few typos so let me try again. The sales worksheet attached to the K1 that I sold in 2020 showed the amount of ordinary income that is determined by the MLP itself .
'If you are interested, the reason that this is not all capital loss or gain involves the "recapture" of accelerated depreciation tax benefits when the MLP is sold. (and I mean fully disposed of, not a partial sale). Be that as it may, in the K1 interview , you are asked for sales and cost basis and also the amount of ordinary income or loss reported on the worksheet. That was 240 gain , which is carried to form 4797. Entering the gain there on the interview accomplishes that. Then enter in the cost basis box the same amount, but as an inverse. (if the ordinary gain is 240 enter -240 in the basis box. And then enter zero in the sales proceeds box.
The net result is that you have taken care of the 4797 entry,
and shown a zero gain on the sale itself, so that there will be no duplication with the entry from your broker statement for its reporting of sales proceeds and cost.
But you have to adjust the broker reported basis to produce the correct capital gain or loss, The sales proceeds are unchanged. When you do the worksheet, you indicate your proceeds, and your cost basis which should be the same as your broker reported. So assume 10000 proceeds
and 12000 cost. That 12000 has then to be reduced by
the adjustment to basis based on the recapture , which is an amount furnished by the MLP. so assume that adjustment is -6000. So your adjusted basis is 12000-6000 or 6000.
Your proceeds are 10000 so 12000-6000=4000 total gain.
If 240 has to be reported as ordinary gain, then 4000-240 is the amount of capital gain (or loss when applicable).
ie 240 ordinary 3760 capital gain- total 4000.
In my actual transaction, I had a capital loss and a positive ordinary gain
So I go back to the 1099 B entry on form 8949 and adjust the broker reported cost so that a gain of 3760 is produced and reported via form 8949. I report the basis adjustment on the "basis as reported is not correct" box and then enter the required amount to produce a 3760 gain. Remember that the PTP has not reported a basis to the IRS, so your 1099 B
is either sales category B or E (short or long non reported)
But there is one other factor. The sales worksheet sometimes does not distinguish between long and short term correctly, or it it does, it is as a percentage (for example 92long 8 short. Since the broker is showing both entries in B and E
if you held the MLP long enough, you have to make the above cost basis adjustment to both the short (B) and long (E) entries, using either the percentage furnished by the MLP
or what you calculate on your own. The ordinary gain going to 4797 is a single number that is not broken down into long and short.
Again this workaround is not original and was posted previously by another contributor, but I found this to be doable and eliminate the duplication of sales proceeds
and also the creation of those bothersome category C
and F 8949 that some workarounds produce.
So I hope this helps, and credit should go to whoever posted this originally. PS I have not mentioned the AMT amounts because AMT is no longer an issue for me.
So end result 4797 is ok, capital gain or loss is ok, and there are 2 "b" adjustments on 8949 B and 8949 E.
You may wish to attach info to explain the b, but that seems to have taken care of everything. Again my same question
why does TT not build this into its program? so those b adjustments are automatic once the ratio between short and long has been entered???
I do not know where the "social security # came into my text box .I did not type it. So just ignore that. The social security # has nothing to do with the workaround.
I imported my 1099 information from my Broker and K-1 files into Turbotax, then did some adjustments so that everything ended up on the correct forms in the correct areas. However, I assumed that since my Sales Schedule list an amount Total Adjusted Basis for Capital Gain Purposes and annotates that “this amount will be used on form 8949”. All I need to do was to go to the Capital Gain work sheet for each transaction, go to part III check box “form 1099-B has incorrect basis” then enter the basis that was listed on my Sales Schedule. And by doing this, this would correctly adjust the cost basis in part 1 of the worksheet and give me the correct gain loss.
However, I also need to calculate the Total Gain and Capital Gain/Loss just to ensure that this information is properly reported on form 8949 and form 4797, but I just want to make sure I understood
Total gain: Proceeds (from 1099B) - adjusted cost basis (SS)
Capital gain: total gain (from above calculation)- Ordinary gain (SS)
Attached is a spreadsheet with the information from my 1099-B and Sales Schedule (info highlighted yellow/blue) and my calculations for my Total Gains and Capital Loss (last two columns), and I was hoping you could just look to ensure that I correctly understood how to calculate these last two numbers.
Thanks
L
your images are not clear enough or my 83 year old eyes new glasses, but let me try again using my # from my sales worksheet,
First what does the MLP provide on the worksheet attached to the K1 and more important relative to the release of passive losses from prior periods: For ages, TT has not clarified the
interview sheet to show a total sale rather than a partial sale.
Numerous postings have pointed that out and still no modification so I use partnership ended rather than disposed of, since the latter could imply either partial or full disposition. Using ended leaves no doubt, and subsequent screens will call for how you disposed etc with a box for by sale. That will produce the desired entry on on form E
showing now available passive losses (current and prior period if you used TT in prior years. (passive losses only usable when you sell your units)
Any way the MLP gives you the broker reported (unadjusted) basis. , the amount of the basis adjustment, and the amount to be reported as ordinary gain on form 4797.
It is up to you to figure out the rest. So, for example, using rounded # from my sale, my total proceeds were 13800.
My broker reported basis 16500. and the broker gain or loss is 13800-16500 or -2700. I am assuming the time period is all long term, but in real life, a portion can be short and the remainder long with 1099 B in sales category B and E
Anyway, the MLP reported a basis adjustment of 10000.
So my adjusted basis is 16500-10000 or 6500. on the sales worksheet. My total gain or loss to be reported to the IRS
is my proceeds 13800 less my adjusted basis 6500 or a preliminary gain of 7300 However, the MLP reported on the sales worksheet that there is an ordinary gain of 8400
so there must be a capital loss of 8400--7300 or ll00 loss
(overall gain 7300 consisting of 8400 ordinary income, and 1100 capital loss. ) Depending on the holding period that loss is either short or long or a portion of both.
So assume it is all long. Go back to the broker entry on the 1099 B where you have entered the broker reported proceeds and the broker reported cost, and adjust the cost to produce a loss of 1100. (check the basis incorrect box
and on the next screen enter the basis that will result in a 1100 capital loss in my example 13800 sales adjusted basis is 14900, There will now be a B code adjustment oh form 8949 to reflect this and I think everyone is happy
with the correct sales, the correct 4797 and the correct
or so I think capital gain and loss.
And if you did not read the prior post when you enter the proceeds on the K1 screen enter zero for sales, the ordinary gain in the ordinary box and the inverse in the basis box
sales zero ordinary gain 8400 and basis -8400.
That eliminates the duplication between the K1 and the broker 1099 , Again if there is short and long holding period, you may to allocate the basis adjustment to show the correct capital gain or loss on Sales category B and E.
Hope that helps, and nothing here is original. Previous contributors were the sources not I.
But there are many issues related to the sales of an MLP
that go far beyond the immediate tax return, namely how to handle UBTI that exceeds $1000 if the MLP is held in a tax deferred account such as an IRA. However that is not an immediate concern if the MLP is in a taxable account.
How did you get the capital loss: $7600? I tried to do the math, but couldn't get the answer. ("In this case, for step 2, you have a cap loss of $7600. ")
@manbeing Note that a couple years ago TT moved their old forum to this new site. All the posts that moved were re-dated to June 4, 2019. I mention that since this thread is really old, and its tough to tell how the later posts apply to the earlier ones. But with that said, the math goes like this:
- Sales proceeds is easy: the amount you sold for, or $500
- Cost is hard. Its not what you paid originally (10,000). Its what you paid, adjusted by the K-1 adjustments (-2500). So cost is actually $7500.
- So profit/loss is sales - cost or -7000.
- But the IRS doesn't tax all losses the same way. In this case, the total -7000 is split. There's $600 of Ordinary Income, and there's -7600 of Capital Loss. Combined, -7600+600=-7000.
Hi, I just don't know where the -7600 of Capital Loss came from?
You mentioned that "(you work out the cap gain/loss by using the K-1 worksheet).", but I couldn't figure it out using the example above.
@manbeing Can you clarify which part of the math is confusing? Or what answer you're coming up with?