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Get your taxes done using TurboTax
I'll simplify with round numbers. I bought AGQ stock in June 2020 for $6000 and sold it 2 months later for $13000. The transaction appears on my brokerage 1099 and results in 26% federal tax and 10% Minnesota tax which sounds reasonable. Then I receive a K-1 for the stock,enter the data into TT, and the resulting tax essentially doubles so that I owe federal tax of 51% and MN tax of 20%, for a grand total of 70% tax. Can this possibly be correct or does it seem like I screwed up entering data?
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you really didn't buy a stock or even a mutual fund. you bought an interest in a publicly traded partnership. you see that box checked on the k-1. that's why you got a k-1. as part of the k-1 package you should have gotten a supplemental schedule to allow you to compute your tax basis in it. that needs to be used in lieu of the cost basis on the broker's statement. brokers receive no update on a partnership's activity which affects tax basis so they use your original cost.
simple example. you bought it for $10K. the partnership had a profit of $5K. you sell it for $15K
broker shows sales price $15K cost $10K profit $5k. so you would have on your return, barring correction, $5K Short-term Capital gain and $5K of partnership income. in fact, your tax basis in the partnership goes up by the $5k of partnership income so you sold for $15K the interest that had a tax basis of $15K. so short-term capital gain = $0. you only had the $5K of partnership income