Investors & landlords

Hi @Jr12398543  ... this is confusing stuff. Let me go over a couple of your questions. I hope this helps a little bit. It's very complicated.

I am not very familiar with publicly traded partnerships, but what I'm saying applies generally to partnerships, LLCs, S-corps not electing to be taxed as corporations.

1. I assume when you say part III "column" N you mean "box" N. There aren't columns but there are boxes.

2. It is important to understand that pass-thru entities (LP's, LLCs) pass-through their income to you even if they never pay you a dime. This is one reason being a minority shareholder in such entities can be very dangerous. This is called phantom income. See https://www.investopedia.com/terms/p/phantom-income.asp ... for an investment entity though, the income should not be fictitious. It is more of a timing thing because any retained income in the entity will increase its value when sold (or decrease your loss). And it should increase your basis.

Therefore you will absolutely pay tax on many of the K-1 boxes. (E.g. 1, 2, 5, 8, 9) even if you don't get any cash. Indeed many rental entities will do the opposite. They will show a loss in box 2 while paying you cash (because of depreciation deductions).

3. Box 8 and 9 represent your share of the entities securities gains or losses. They will flow to the right spot on your Schedule D. (either line 5 or 12).  Such losses are not passive, you always get to take them.  Your box 8/9 amounts therefore are always taxed even if you haven't sold your LP/LLC interest. Your box 5 number should show up on your Schedule B as interest income.

4. Your basis is very important.  When you sell your interest your gain (or loss) is your proceeds (what you sell your interests for) minus your adjusted basis.

Your adjusted basis (can't be negative) is what

• you originally paid
• + any later investments 
• + any income (phantom or not)
• - distributions you received
• reduced for any losses

There are more things, but that  is a good starting point. See https://www.irs.gov/pub/irs-pdf/p541.pdf starting on page 9.

I don't understand if box 8/9 gains/loss effect your basis. The probably do. Oh given your numbers they do. You say your cum basis adjustment is +2704, which is box 5 ($16 interest) + box 8 ($2412 ST cap gain) + box 11 code C ($284 straddle income) - box 13W ($8 deduction). That's what you were taxed on (phantom or not) so that increases your basis.

Re: your K-1 Part II. Frequently it is hard to understand. You can ask the LP.  I think Part L should always add up and you should be able to find the numbers somewhere but it is often hard to figure that out. I don't understand why it doesn't add up and why it is 2700 and not 2704 or 2712.

So the $2704 is totally different from your gain or loss on selling your interest in the partnership. It is your gain from the year from the operations of the partnership. Your gain on the sale of the partnership is where you report the money you got for the sale minus your final adjusted basis. That seems like it is $13k, but I'm not sure since you mention you had previously sold some.

You aren't being taxed twice if you think about it like this. You invested $10k. You are taxed on $2.7k of phantom income. But that should increase the value of your interest by $2.7k (the all other securities owned by the partnership stay the same, which they won't). So you would then be able to sell for $12.7k. You gain on the sale would be $12.7k - 10k original basis - $2.7k basis change = $0 gain. Of course you might sell for more or less than $12.7k depending upon how the market moved.

You deal with that during the sale interview or in TT go to forms mode on the k-1 and look at the final amended section for the disposition checkboxes or "quickzoom" box for sale or disposition. You can probably get there from the interview as well.That's where you enter your basis for the sale and the gain or loss will flow to the right place. Be sure doesn't show up twice (especially if you imported the 1099-B).