Do I enter a negative cost basis after selling MLP...
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Returning Member

Do I enter a negative cost basis after selling MLP?

I sold all of an MLP in 2019 at a loss.  Statement A that comes with the the K-1 shows a purchase price of $31,776, a cumulative basis adjustment of -$39,123, a cost basis of -$7,347, and a gain subject to recapture as ordinary income of $15,986.  Do I enter the -$7,347 as my cost basis or do I enter zero as my cost basis?  Also, on the K-1 form the -$7,347 is calculated so that when combined with the ordinary business income loss for 2019 my "ending capital account" is zero.  So it seems that this is just a calculated number and not my real basis.

4 Replies
Level 7

Do I enter a negative cost basis after selling MLP?

Capital account is different than your basis.....outside basis is what's important and you need to compute that....but you can't have a negative basis.

Anonymous
Not applicable

Do I enter a negative cost basis after selling MLP?

if your capital account went negative which it apparently did things get complicated. you should have reported a negative capital account as capital gain the year it went negative and each year thereafter that the negativity increased.  MLP as a rule showed capital a/c's in schedule L on the tax basis (inside and outside basis are the same).  the fact that ending capital is zero is because the MLP plugged withdrawals and distributions to make it come out zero. 

 

TT can not handle a negative cost and neither can most pro software. you have a significant tax issue see a tax pro. 

Returning Member

Do I enter a negative cost basis after selling MLP?

Thank-you for addressing my question.  The capital account (my basis) was positive the year before (2018) so my thought, since I sold all shares in 2019, was to adjust the 2019 "current year loss" so that the basis is exactly zero.  That way I am not getting credit for all of the loss for 2019, just the loss that I am allowed until my basis is zero.

Anonymous
Not applicable

Do I enter a negative cost basis after selling MLP?

what you did works unless there were multiple types of income, losses and expenses. even then the net difference likely would be zero. however, the preferred way, at least from an IRS standpoint, would have been to include  form 6198, the at-risk tax form

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