most likely the brokerage does not have the correct cost/tax basis. that's because you receive a k-1 that affects the tax basis. The brokerage doesn't get a copy and therefore does not adjust for the k-1 effects.
the type is either B if short-term or E if long-term (tax/cost basis not reported to IRS)
with the k-1 you should have received a sales schedule that will allow you to compute the correct tax basis to use.
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here's a primer on reporting the k-1 and sale. So yes. the gain would in effect be double counted. Once through the k-1 and then the use of the 1099-B cost which may be lower than your actual tax/cost basis.
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MLP and PTP reporting k-1 and 8949 (box on k-1 checked)
Enter the k-1 info
Check the PTP box
If total disposition proceed as follows:
Check final K-1 (s/b marked on actual k-1)
Check sold or otherwise disposed of entire interest
On the k-1 disposition section for sales price use the ordinary income (sometimes you’ll see a column with the “751” or the words “Gain subject to recapture as ordinary income” or similar wording. This info comes from the supplemental sales schedule that should have been provided. It's also now on the k-1 box 20AB - no 20AB, no ordinary income column then the sales price is zero. The numbers I’m using represent the line numbers in forms mode (desktop only)
- Sales Price = line 20AB (1065 k1)
- Selling expenses = 0
- Basis = 0
- Gain is computed and should be the same as the sales price.
- Ordinary gain = enter same as sales price
This amount flows to form 4797 line 10 and is taxed as ordinary income. This step is necessary so that any suspended passive losses are allowed.
Now for the 8949.
The broker’s form is probably coded as B or E – sales proceeds but not cost basis reported to the IRS. This is because the broker does not track the tax basis. It used what you paid originally which is not correct.
The correct tax basis is:
What you paid originally, should be the same as what is on 1099-B as cost,
Then there is a column on the sales schedule that says cumulative adjustment to basis. If it’s positive add it to the original cost. If it’s negative subtract the amount.
Finally add the amount of ordinary income reported above, if any.
The result is your corrected cost basis for form 8949.
Some other things. Look at lines 20AB. That number should be added to the ordinary income above for reporting the 199A (qualified business income from the PTP). You don’t have to enter this but then you lose out on a tax deduction = 20% of this amount.
