Business & farm

Thanks for the tip. I have processed PTP sales in the past, so I had a pretty good idea as to how to proceed. My problem was how to enter the cumulative cost basis adjustment onto the capital gains calculations.

Here is how I proceeded:

1. Use the step by step to enter all the K-1 values into TT, including those on the K-1 sales Worksheet. When done, navigate to the forms view of the K-1 and scroll down to the box that says “I sold some shares”. Make sure it is checked. Click on the Quick Zoom box, and another sheet opens up. It directs you set revenue and cost = 0 (lines 5 &7). When you do this, the correct Ordinary Income from the K-1 Sales sheet gets transferred to form 4797 as regular income. TT also enters this same amount as a negative value on a new 8949 form!! This adjusts Cap gains to eliminate the Ordinary income that is reported on the 4797. So far, so good!!
2. Now you only need to adjust Cap gains to account for the cumulative cost basis adjustment from the K-1 Sale Sheet. The Ordinary Income adjustment as been done for you. The K-1 instructions say to enter the adjusted cost on form 8949 column E. The TT instructions on the K-1 QuickZoom says to “Enter the 1099-B transaction on Schedule D…”. Both instructions are tax-wise correct, but neither can readily be accomplished in TT. I couldn’t find any way to adjust Schedule D.

In the past, I had adjusted the 8949 as recommended by the K-1 sales Sheet. It had worked OK. This year, these adjustments (over rides) were flagged by TT as errors and stopped use of E-File. Something may have changed in the system??

After looking around a bit, and as you suggested adjusting the 1099-B transaction, I found that you can’t update the 1099-B directly (mine was electronically downloaded weeks earlier and had a boatload of transactions), but you can go to the Capital Asset Worksheet attached to the 1099-B, and then locate the transaction in question. A Double Click (see the notes on the Capital Asset Worksheet) on the transaction, and an “adjustment window” opens, allowing you to add an adjustment amount, a code for the adjustment (I used “B”), and an explanation. Perfect!! This transfers all the information to the 8949 as required, and no error flags!! For some reason, also had to click the Multiple transaction box for the changes to take effect, but that’s ok, I summarized several transactions and entered the entire adjustment on one transaction.

One thing to remember is the K-1Worksheet says to enter the cost basis on the 8949, but you are actually entering a Gain adjustment in TT. No revenues or cost basis numbers in the 1099, etc. change. There is simply a Gain adjustment included in the adjustment field. The sign of the gain adjustment will be the opposite of the Cost adjustment on the K-1.

One other thing to look out for. I found that the K-1 Cost basis and the 1099-B cost Basis prior to any adjustments are not always equal!!!  I contacted TaxPackageSupport and found that they use an average cost basis for unit sales and spread a sale over all units in the account. Your broker could use FIFO, LIFO or some other method, but probably not an average basis. So if you had previously sold shares, the two bases will be forever different. I had this problem on one set of transactions. Others came out OK – The two cost bases were identical … 1099 - B = K-1 Sales Sheet.  I believe the K-1 basis is the correct one (the 1099-B shows the date in section E – not reported to the IRS, since they are not necessarily correct), so you may need to add this adjustment to the K-1 sales Sheet adjustment to get the correct total adjustment, since the 1099-B is starting with the wrong cost. As before, check the sign of what you are adjusting - you are adjusting the gain to account for the different cost basis starting point.

Whew!! It does work, but the instructions in TT are very obtuse; it may be good tax advice, but rarely address how to do what is needed.

Thanks again for the tip on adjusting the 1099 – that’s what steered me in that direction.