Still searching for an answer to this. Here's what I am thinking about doing.
Since there is no information in any of the IRS publications about where to enter the information included as Line 20 Code U, I am proposing doing the following. (Note: Line 20, Code U lowers the capital gain on the sale, because it increases the cost basis.)
In TurboTax Desktop, I propose to enter the capital gain reported on line 10 MINUS the basis adjustment reported on Line 20 Code U as the value for line 10. Using dummy numbers:
Schedule K-1 (from LLC)
Line 10: $100,000
Line 20, Code U: $20,000
Schedule K-1 (entries into TurboTax Desktop)
Line 10: $80,000 (= $100,000 - $20,000)
Follow this entry with a statement attached to the return stating why the values reported on Form 4797 Line 7 do not match the value on the K-1 submitted to the IRS by the LLC.
Does anyone see a fatal flaw in this approach?
Thanks for the input!
