Final Schedule K-1 from Publicly Traded Limited Partnership Questions

[Faustind]

For several years, I was a domestic, passive, limited partner (100 shares) in TC Pipelines, LP (a publicly traded limited partnership). On 03/03/2021, when the sponsor "purchased" (via a stock exchange) all outstanding publicly traded interests in TC Pipelines, LP, the partnership became no longer publicly traded. Our 100 shares of TC Pipelines, LP was EXCHANGED for 70 shares of TC Energy Corporation. I recently received our Final Schedule K-1 from TC Pipelines, LP. As I try to accurately enter the K-1 information into TurboTax Premier and to follow the accompanying help information, I don't know whether this  was a COMPLETE DISPOSITION, A DISPOSITION NOT VIA SALE, or something else? Further, the K-1 indicated that I had Section 199A income and should have received a Statement A. I did not and TC Pipelines indicated that they cannot provide one. So what do I do? Thank you.

[Mike9241]

did you hold TC thru a broker? if yes, and the exchange was taxable 99.999% likely you should see the reported sale on the 1099-B. the only thing wrong with this is the cost basis is wrong

you'll need t final k-1 to report properly.

there should be a sales schedule as a supplement because you need to determine your tax basis  the total gain and the amount of total gain that is ordinary income (section 751) with the balance being capital gain/loss

assuming the sale is taxable, you need to indicate on the TT k-1 it's final and a complete disposition was made

in the k-1 disposition info you list sales price only as an the 751 income cost as 0 ordinary income as sales price.

on the 1099-B which should indicate cost basis not reported to IRS you'll need to change that to the computed basis

should be something like this from sales schedule

purchase price/initial basis

plus cumulative adjustments to basis (if minus sign then that reduces basis a plus or no sign increases basis)

plus 751 income reported/gain subject to ordinary income recapture (verbiage varies but should refer to form 4797)

for 199A there may not be a Schedule A but an unlabeled supplementary schedule. line 20Z1 should have the 199a info.

there is no k-2 or k-3 so ignore those boxes if checked,.

[Faustind]

Hi Mike9241,

Thank you so much for your prompt and informative reply.

TC Pipelines was indeed held through a broker, but on the Consolidated 1099 statement that they produced, there is no 1099-B statement regarding this exchange/sale. I also received a Form 8949 and Schedule D statement from the broker, and there is no indication of this exchange/sale.

TC Pipelines did provide a Final K-1 and a 2021 Sales Schedule as you mentioned. When entering K-1 information on TurboTax (TT), regarding “Describe Partnership Disposal”, I want to enter “Complete Disposition”, but the “Learn More” section indicates “If a passive activity or former passive activity is involved in a like-kind exchange, the activity should NOT be considered fully disposed of and current year losses and passive carryovers are still subject to the passive activity loss rules.” As this was a LIKE-KIND EXCHANGE of shares involving 2 passive activities, I thought “Complete Disposition” would not be the correct choice. Another choice offered on TT is “Disposition was not via a sale”, which didn’t seem correct either. I chose “No entry”. You are telling me to enter “Complete Disposition”, which is fine.

I don’t see on TT where to enter that the K-1 is Final, but I will try to find that.

When you said “in the k-1 disposition info you list sales price only as an the 751 income cost as 0 ordinary income as sales price”, I don’t understand exactly what you are telling me. I apologize for my ignorance.

As there is no 1099-B, when you said “on the 1099-B which should indicate cost basis not reported to IRS you'll need to change that to the computed basis”,  I will try to enter that if I encounter a place to do so.

On the K-1, there is indeed a line 20Z1 entry for Section 199A Publicly Traded Partnership Income with one number indicated, but TT wants much more information than this single entry provides. Please see screen shot below:

 

Thank you so much for your patience and understanding. Any detailed instruction that you can provide is greatly appreciated.

[TNowinski]

The response to this question is totally inadequate to permit accurate reporting of the TC Pipelines merger on Turbotax.  Get someone on this who knows partnership taxation.

[Rick19744]

I will provide some guidance for others that may be in this same position:

• TC Pipelines was a publicly traded partnership (PTP)
• As such, this was deemed a passive activity for purposes of the passive activity rules
• When PTPs are held, these entities are not netted with other passive activities.  Each PTP is treated separately.  This means that each PTP losses are tracked separately and can only be used against income from this same PTP or when there is a complete disposition of the PTP.
• This transaction was treated as a merger where each unit holder of TC Pipelines received 70 shares of TC Energy for each 100 units of TC Pipeline owned.
• As a result, there is no complete disposition of TC Pipelines; it is now TC Energy.
• Each unit holder of TC Pipelines should have been maintaining a basis schedule of their investment in the PTP.
  • This basis schedule should be updated for the applicable final K-1 figures.
  • This basis amount is now your basis in your TC Energy stock.
  • However, if the PTP had any suspended losses, these suspended losses are added to your tax basis noted above.
• This is why there is no sale or exchange information provided; there was no sale or exchange.
• At this point, I would just update TT with the final K-1 amounts and not indicate that this is the final year.
• Doing this will allow TT to compute the correct PTP income or loss.
• Once the return is complete, you will then know the actual suspended losses, if applicable, and then add this amount to your tax basis.
• Next year you will need to eliminate all the suspended losses from TT, mark the PTP as final and you can just show no gain or loss.
• If you are savvy enough to do this later part in the current year, go for it.
• Good luck

[claytondaley]

My bank/brokerage produced a 1099-B showing this transaction with an unknown or unsubstantiated basis that generated a small gain.  If I follow your statement, the basis should actually be the sale price (to produce no immediate tax impact) and the basis for the TC Energy (in the bank/brokerage file) should be updated based on the TT calculations for the PTP.

[RobertB4444]

@claytondaley  You have that correct!

[itsonlymoney]

Hi and thanks to all.  I have lost sleep over this one.

I understand and can inport info from brokerage and TC pipelines and record basis for TC Energy.  

Besides, reporting the k-1 info, do I need to do anything with the following info provided by TC PIPELINES?

Purchase price/initial basis amount

Cumulative adjustments to basis

Cost basis

Gain subject to recapture as ordinary income

Amount gain/loss

Percentage long term

Adjusted for bonus depreciation - cumulative adjustments to basis (we are in florida)

Adjusted for bonus depreciation - gain subject to recapture as ordinary income

Thank you!

[DianeW777]

The information provided by our awesome Tax Champ @Rick19744 gives all the details necessary for this particular holding.  The basis schedule is used as follows and provides details to complete your tax return. Additional notes are included below to help you.

• Each unit holder of TC Pipelines should have been maintaining a basis schedule of their investment in the PTP. (You should have this from prior years).
  • This basis schedule should be updated for the applicable final K-1 figures.
  • This basis amount is now your basis in your TC Energy stock.
  • However, if the PTP had any suspended losses, these suspended losses are added to your tax basis noted above. 
    • Suspended losses would have occurred in an earlier year. These are losses you were not able to deduct in the past because a PTP is only allowed to reduce it's own income by any prior year losses.  This continues until there is a full disposition of the investment (Final k-1). Once a disposition does occur, all prior suspended losses are allowed to be used in the same year.
• This is why there is no sale or exchange information provided; there was no sale or exchange.
• At this point, I would just update TurboTax with the final K-1 amounts and not indicate that this is the final year.
• Doing this will allow TurboTax to compute the correct PTP income or loss.
• Once the return is complete, you will then know the actual suspended losses, if applicable, and then add this amount to your tax basis.
  • The sale or disposition takes place inside the K-1 entry. Go back to complete this and select Complete Disposition and then select Sold > Follow the screens to answer the questions.
• Next year there will be nothing to report, but now you can mark it Final with no other action and 2022 should not show the K1 activity.

@itsonlymoney

[itsonlymoney]

OK.  I've entered info into TT.  TT indicates that the items below may need to entered elsewhere.  Any help as to where I need to enter info is greatly appreciated.

20AB. Section 751 gain/loss

20AG Gross receipts for section 448(c)

20Z1  Section 199A PTP income

AH3 Gross receipts

AH5. Federal Reg bonus depreciation adjustment for non-conforming states in ordinary business income

Thank you.

[TNowinski]

The first three are available line items under Box 20 information.  TT has no home for the other two, but shouldn't affect the tax outcome.

[itsonlymoney]

Thanks for reply.  I'm not sure I understand your response.

I entered all items in TT under box 20.  TT has asterisks next to entries  indicating that these need to be "manually" entered on another form.  I'm not sure where ,form and line, these items need to be entered.

Thank you

[PatriciaV]

Certain Schedule K-1 Box 20 items (generally labeled "Other" and designated with asterisks on the entry screen) may need to be entered in several different places in TurboTax. Consult the instructions that were included with your Schedule K-1. These should tell you the form and line where the amount should be entered.

The easiest way to find any section of TurboTax for Desktop is to open your return and use the Search box at the top right side of the TurboTax header. Click on the magnifying glass, type in the topic you need, hit Enter, and click the "jump to" link to go directly to beginning of that topic.

In TurboTax Online, go to Tax Tools in the left column >> Tools >> Topic Search. Type in your topic, then click the topic in the list and then GO to go directly to the start of that section.

[itsonlymoney]

Thank you for response.  Unfortunately, the K-1 does not provide the form and line to insert the information. 

For now, I'm going to enter the merger information by importing the 1099-B data from the brokerage and importing the data for the K-1 from the partnership (TC pipelines).  I suspect I'm making too much outa nothing and the imported data will provide the information needed by the IRS in the proper locations.

[carolgib2014]

How in the world do you mark a K-1 as final?