Good Morning Nexcap. I'm a little confused by your answer. Here is my analysis. For argument sake, when there was no K-1, my Total Tax on my return for everything with only the $700 gain from the 1099-B was $1,950. When I add the K-1 form, the Total Tax on my return jumps to $2,011. So clearly I'm being taxed twice. This shows up on Schedule D as: Short term gain of $700 (from 1099-B), $328 (from K-1) and Long Term gain of $492 (from K-1). A total taxation of $1,520 ($700 + $820). (The K-1 has both long and short term due to Code C - Contracts and Saddles on the K-1).
I agree, I should only be taxed on the short term gain of the 1099-B of the $700. The easiest way I see to adjust so that my Total Tax due is back to $1,950 is to adjust the cost basis on the 1099-B (since that is not reported to the IRS). I did this adjustment on the form "Capital Gain Adjustment Worksheet". In Part II "Manual Adjustment", I entered Code O and a negative $350. That increased my 1099-B cost basis to $2,750. Now my Total Tax Due is back to $1,950. Basically the Long Term gain from the K-1 was counteracted by the 1099-B gain.
So now both are shown, K-1 and 1099-B (needed since sale amount is reported to IRS) and Total Tax Due is back to the original amount (without the K-1). Does this make sense? Anything else I should Do?
