1099-B and K-1 Form

Forum|Forum|5 years ago
April 10, 2021
2 replies
0 views

I know there have been variations of this situation, but sometimes there are conflicting answers. So here goes. I bought and sold all my USO ETF in 2020 and received both a broker 1099-B and K-1 for the sale. On the 1099-B, the cost was $2400 and sale was $3100, or a net income of $700. On the K-1, the cost was $2400 but the sale was $3220 or a net income of $820. I entered all the K-1 info as prompted by TT. Then as not to duplicate the profit, I read that I would simply increase the cost basis of the 1099-B by $120 (the difference in profit). But in doing that, I still owe more taxes than if I just reported the values of the 1099-B and didn't report the K-1. I know it is best to report both, but do I adjust the 1099-B cost basis until I have the same tax if without a K-1 or am I missing something? Appreciate any help. Thanks in Advance.

nexchap

Level 9

I may be able to help, but first need a little more info. Typically a K-1 won't report the proceeds from a sale: your broker sees that information, but the partnership is only notified that you sold xx units. So where on the K-1 is it telling you that the sale was for $3220? And how much did you actually sell for (according to your own records)?

**Say "Thanks" by clicking the thumb icon in a post. **Note also, I'm not a Tax Preparer/CPA. Just a volunteer, seasoned, TurboTax user. . Use any advice accordingly!

bobp1426Author

Level 2

Under Schedule K-1 "Partner's share of income, Deductions and Credits" item L "Partner's Capital Account Analysis" item "Withdrawals & Distribution" - that is where the value of $3220. I actually sold for $3,100 per the 1099-B Broker and my records. No Dividends or other distribution since only held for a few months.

nexchap

Level 9

OK. That $3220 is not your revenue. "Withdrawals" on that line refers to the cost basis you withdrew, not how much you sold it for.

As a simple example,

if your beginning capital account was $0,
you bought for $2400: "Capital contributed"... would show $2400
every line on the K-1 is 0: "Current year net income" would show $0
you sold late in the year for $3100: "Withdrawals and distributions" would show $2400 -- the value of the capital you originally contributed.

In your case, since you bought for $2400, and received no distributions, I'd assume there's $820 worth of income showing up on the K-1, which is what raises your Capital to $3220. That $820 is going to show up on your return somewhere (make sure you verify that!), and you'll be taxed on it. As a result, you increase your basis on your 1099-B by that $820 to avoid any extra taxation.

In the real world, you spent $2400 and received $3100 for a profit of $700. You should pay taxes on $700
In the tax world, you got some phantom stuff on the K-1 worth $820. So you get to change the basis on your 1099-B to give a Cap Loss of $120. Again, you pay taxes on a total of $700.

Note that its a little more complicated if the Sales Schedule shows Ordinary Income, but I don't think that applies to USO

**Say "Thanks" by clicking the thumb icon in a post. **Note also, I'm not a Tax Preparer/CPA. Just a volunteer, seasoned, TurboTax user. . Use any advice accordingly!

Mike9241

Level 15

USO's legal structure is that of a partnership. that's why you got a k-1. so you need to report the k-1 info on your tax return. in addition, the 1099-B shows only your original tax basis (what you paid to purchase it in the section - cost not reported to IRS section of 1099-B (type B or D depending on holding period) with the K-1 you should have received a sales schedule which will allow you to compute your correct tax basis which then should be substituted for what's on the broker's statement.

the 1099-B shows only your original tax basis - the reason for this is the broker receives no updates as to items affecting tax basis such as the income/loss and distributions all of which affect your tax basis

Haydenbyers

Level 2

Thank you for this answer. I have 7 K-1s and I’m a lot of different transactions related to these publicly traded partnerships on my 1099-B.

Also almost all of these transaction are showing up under the “cost not reported to IRS section of 1099-B type B” section. Any tips on computing the correct tax basis which then should be substituted for what's on the broker's statement? I have a ton of entries. I knew I felt like I was being taxed twice by having it on the k-1s and 1099-B without adjusting the cost basis. Thank you

nexchap

Level 9

@Haydenbyers This thread gets into the detail on how to handle this. Its been running for several years, so there's lots of different examples and clarifications in the comments:

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/how-i-report-the-sale-of-mlp-shares-in-turbo-tax-i-sold-all-shares/00/776624

**Say "Thanks" by clicking the thumb icon in a post. **Note also, I'm not a Tax Preparer/CPA. Just a volunteer, seasoned, TurboTax user. . Use any advice accordingly!