1099-B Uncovered Securities Cost Basis and Limited Partnership

[ndc24075]

I recently received my 1099-B from my brokerage company and noticed that the uncovered securities listed on it. Specifically, some transactions that should have been marked as covered were instead marked as uncovered because all of the sell transactions have corresponding buy transactions on the same day. The brokerage company told me it is because those uncovered securities listed are limited partnership. I am a bit confused as to why this could be an issue for the brokerage company to recognize the cost basis for the sale proceeds. However, I want to make sure that I am entering the cost basis correctly in TurboTax.

Are there any special considerations or potential pitfalls that I should be aware of when entering the cost basis for limited partnerships in TurboTax? I am planning to straightforwardly find all the cost basis for the same day and enter it in the appropriate field, but I want to be sure that I am doing everything correctly.

[GeorgeM777]

Whether these are publicly traded limited partnerships or not, you can use your purchase price, plus commissions/fees if any, as your cost basis.   In your post, you mentioned that the buy and sell information as reflected on your 1099-B indicates that the buys and sells occurred on the same day.  Is that true?  

If these were not publicly traded limited partnerships, how were you able to sell them?  Depending on your follow-up response, we may need additional information to better understand your tax situation. 

@ndc24075 

[ndc24075]

@GeorgeM777 Thanks for your explanation. The 1099-B only reveals sell transactions. There is another statement provided by the brokerage company that shows all buy and sell transactions. That is how I found all the so-called uncovered ones are actually covered.

The transactions I referred to are all for public traded partnership, such as UVXY, SVXY, and so on.

[GeorgeM777]

Thank you for the additional information.  UVXY and SVXY are ProShares Exchange Traded Funds (ETFs) that seek to profit from changes in S&P 500 VIX Short-Term Futures Index over the course of a single day.  You are correct in that both funds have been structured as limited partnerships.  Accordingly, they will send a Schedule K-1 to their investors.  

ProShares has indicated that investors should expect to receive their Schedule K-1 in mid-March.  Have you received your Schedule K-1?  Your Schedule K-1 may differ from what is reported on your 1099-B which you may get from your broker.  However, you will need your Schedule K-1, along with your broker's 1099-B, to calculate your gains/losses with respect to these ETFs.  It can be a rather complicated process and if you have many transactions, it may take some time entering your information into TurboTax.

Here is a link to the Prospectus for UVXY and SVXY which was obtained from the Proshares website.  It's a lengthy document, but if you select Ctrl and F on your keyboard (PC) or Command and F (Mac) and enter in the search box the term "tax" (you don't need to include the quotations) you can review the pages that relate to taxes to get a better understanding of how to report your gains and losses.  

Pro Shares Trust II_UVXY and SVXY

@ndc24075 

[ndc24075]

@GeorgeM777 No, I have not received any K-1. But I am not sure whether I will really receive it because I never held these positions over night. I buy and sell these positions in a day so there should be no distributions from these partnership to me. Do you think there is something I may misunderstand?

[GeorgeM777]

Perhaps.  The management/advisors for both ETFs have stated that that shareholders will receive a Schedule K-1.  Many, if not all, shareholders that buy and sell these ETFs do so daily.  In fact in the Prospectus that was sent in the previous post indicates that shareholders who invest in these ETFs should actively manage and monitor their investments, as frequently as daily.   Given the leverage that both ETFs use, it is common for firms to recommend that their customers not hold these ETFs overnight.  

The Funds are treated as partnerships for tax purposes, so an investor’s allocated share of a Fund’s income, gains, losses and deductions is reported on a Schedule K-1. Investors will not receive a Form 1099-DIV, issued by most mutual funds and other ETFs, which itemizes the taxable distributions received by the investor.  As a result, your Schedule K-1 tax package may include a Sales Schedule which provides instructions on how to compute your gain or loss to fully reflect your experience as a shareholder and a partner of the Fund.

@ndc24075