Investors & landlords

Your questions are italicized below and will be addressed in the order in which you presented them.

How to report correct gain for USO on Turbo Tax?  I was told to add $NNN and $MMM to the cost basis of USO. If we do that, that will make cost basis of USO is not same as reported on 1099-B.

You are correct in that your basis needs to be adjusted.  The Prospectus for the United States Oil Fund provides that if a shareholder sells its shares, it will recognize gain or loss equal to the difference between the amount realized and its adjusted tax basis for the shares sold. 

Regarding how to determine your adjusted cost basis, the Prospectus provides that your basis 

1. increased by (a) its allocable share of USO’s taxable income and gain and (b) any additional contributions by the shareholder to USO and,
2. decreased (but not below zero) by (a) its allocable share of USO’s tax deductions and losses and (b) any distributions by USO to the shareholder. 

Thus, if $NNN and $MMM are synonymous with number 1 above, then increase your original cost in USO by that amount.  If not, then apply number 1 and 2 to $NNN and $MMM and make the necessary adjustments to your basis. 

Or there are any ways to adjust cost basis of USO without modifying cost base from 1099-B (for example enter $NNN and $MMM on a form 1234, etc.)?

Yes, there are way to adjust cost basis in TurboTax.  However, when you enter your USO information, enter your original basis and then you will indicate that the original basis is not correct and needs to be adjusted.  If you are using TurboTax online, follow these steps:

1. From Wages & Income, left margin, scroll down the screen to Investment and Savings.
2. Select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).  
3. If you have already entered some investments, then select Add investments.   
4. You can import your tax info on the screen that gives you that option or you can choose Enter a different way.  If you select Enter a different way, then select the investment type--which in your case would be Stocks, Bonds, Mutual Funds.  
5. Continue through the application, and when you get to the screen Now, enter one sale on your [Name of Brokerage] 1099-B, scroll down and check the box indicating that The cost basis is incorrect or missing on my 1099-B.  
6. Continue through the application.  At the screen We noticed there's an issue with your cost basis...Let us know if you'd like to make changes, check the appropriate box and enter your information. 

If you are using TurboTax CD/download, the process is somewhat different.  Select the Personal tab, then the Personal Income tab, then scroll down the screen to Investment Income and select Stocks, Mutual Funds, etc.   As you enter your information, you will see the screen, Select any less common adjustments that apply.  Check the box, The cost basis on my statement is incorrect and in the pop-up box enter the correct cost basis.

If we have to modify cost basis on 1099-B, should I write a note to IRS to explain cost basis discrepancy? If explanation is needed, that mean I have to file by paper to include USO cost explanation since I don’t think we can send note to IRS via e-file.

No, just follow the steps above.  However, keep your documents regarding USO in the event you need to explain how you arrived at your adjusted cost basis.