Investors & landlords

@mlpinvestor here are my follow-up thoughts:

• There are a lot of facts that really need a one on one discussion, but I will do my best based on a forum such as this.  You may want to consult with a tax professional and also see if you can find your Dad's prior year tax return.  This would help a tax professional in understanding what occurred in the past.
• The first thing you should do is split the K-1 into two groups; your Dad's final 1040 for 10/12 and the irrevocable trust for 2/12.
• Determine if you can, the timing of any distributions on the K-1 and use those for the applicable period; pre and post.
• The vast majority of MLP K-1's reflect tax basis, so I am going to use that as an assumption.
• Based on bullet #4, your Dad either took losses that he shouldn't have, due to either tax basis, at-risk limitations or MLP (PTP) loss limitations, or he has suspended losses.  This is really a key item.
• If you cannot determine your Dad's basis, and there are losses flowing through the K-1, I would take a conservative position and not take any of the losses.  The negative basis tells me there is most likely no position to take the 2021 loss.
• You then indicate that there was an unexpected repurchase of MLP units post death.  This purchase price would be a good indication of the FMV of the units; which will then allow you to determine the step-up value.
• Since the units were repurchased post death, and would be a reasonable position to indicate FMV, I would say there is no gain or loss on the repurchase of units.  I would report the sale / repurchase using the repurchase price as the sales price and cost basis (step-up).
• Based on the repurchase price you now have the value of the remaining units.  You haven't indicated whether you continue to hold this investment, so not sure if this is even applicable.  But this does have implications if you continue to hold units.
• You indicate that the repurchase was reported under your Dad's SSN.  Since, based on the limited facts, you will take the position that there is no gain or loss, as noted in bullet #8, reporting this on your Dad's final return would avoid any matching issue.  While technically this should be reported on the irrevocable trust return, since there is no gain or loss, there is no tax consequence.  This could easily be explained should you be audited.