@nexchap @Mike9241
Another year, another MLP sale to enter. Let me reconfirm my understanding of your method, one more time. I have cumulative adjustments to basis totaling -$1,636 and $1,061 in gain subject to recapture as ordinary income. This latter is shown as section 751 gain, which I entered as Box 20 code AB. One question I have is, will Turbotax send this amount to ordinary income just by entering it in the Box 20 Information page, or do I need to manually go in and add it somewhere, like in the ordinary business income (box 1) or short-term capital gains boxes (box 8)?
From what I remember about the workaround method, I need to net the cumulative basis adjustments against the original 1099B cost basis to figure the total gain or loss. Subtracting this adjusted basis from the original purchase price gives the capital gain, which for me is 100% long-term.
The 751 portion is a short-term gain and is separate from the adjusted basis, i.e. it represents an additional tax owed. So I enter the 751 part in the K-1 section and the capital gain part in place of the broker’s 1099B figure. All correct? The confusing thing about it is that the phrase “gain subject to recapture as ordinary income” makes it sound like this is a fractional part of the capital gain on sale calculation above, rather than being its own tax item. So you have short-term gain (if any), long term gain, and finally 751 ordinary gain, all separate things. Right?
Also, as this was a partial sale this time, I understand that suspended losses remain suspended, but capital gains must be recognized. However, one thing I’m not completely clear about is whether the cumulative basis adjustments only reflect the capital gain on the units I sold, or whether it also includes adjustments representing unrealized gains on the remaining units as well. If so, how should I separate the two in order to recognize only the realized gains at this time?
Thanks much, again.
