MLP reporting k-1 and 8949
Please follow these instructions. Incorrect entries can result in entering the sale twice or otherwise incorrectly. Also, see the sales schedule that was included with the k-1
Enter the k-1 info
Check the PTP box
If total disposition proceed as follows:
make sure to check final k-1 box and total disposition.
On the k-1 disposition section for sales price use the ordinary income (sometimes you’ll see a column with the “751” or the words ”gain subject to recapture as ordinary income”
Cost is zero
Ordinary income is the sales price.
The ordinary income flows to form 4797 line 10.
Now for the 8949.
The broker’s form is probably coded as B or E – sales proceeds but not cost basis reported to the IRS. This is because the broker does not track the tax basis. It used what you paid originally which is not correct.
The correct tax basis is:
What you paid originally, should be the same as what is on 8949,
Then there is a column on the sales schedule that says "cumulative adjustment to basis". If it’s positive add it to the original cost. If it’s negative subtract the amount.
Finally, add the amount of ordinary income reported above.
The result is your corrected tax basis for form 8949.
Some other things. Look at lines 20Z1. That number should be added to the ordinary income above for reporting the 199A (qualified business income from the PTP). You don’t have to enter this but then you lose out on a tax deduction = 20% of this amount.
ignore boxes that are zero
enter 11c that a loss from section 1256 contracts that will carry to form 6781 and from there to schedule D
