K-1 vs 1099

[flyfresno]

I do not want to double report capital gains. I sold out of all of my EFTs last year (mostly because the taxes on them are so complicated) and I do not want to double report my capital gains, but also want to make sure I am reporting them right. It looks like all of the capital gains were reported under the 1099 section when I uploaded my 1099 from Schwab. However, I am now working on the K-1s and it is asking if I sold out of the funds, which I did. When I enter the amounts, my refund is reduced proportionately, but those capital gains/losses were already reported under the 1099 section (they are the same amounts as the K-1s from what I can see). So I suspect I am double reporting them, but I also have no idea if I should report them under the K-1 section or the 1099 section. So what's the correct way to do this?

[DavidD66]

It sounds like you sold Publicly Traded Partnerships  (PTP)/ Master Limited Partnerships (MLP).  When you sell these, you have to report bptj your K-1 and your Form 1099-B transactions. PTPs make "dividend" payments which are in part a return of basis.  Therefore, when you sell them you have to calculate both capital gain/loss - reported on Form 8949 and Schedule D, and ordinary income reported on Form 4797.  Reporting the information in your K-1 package will result in ordinary income being reported on Form 4797 and a gain or loss on Form 8949. But you also have a 1099-B with the same sales that needs to be reported.  Report the information on the 1099-B and then adjust to cost basis to equal the sales proceed, resulting a gain/loss of $0.  The sales information on the 1099-B will match what the information the IRS receives and expects to see reported, and the correct gain/loss and oridnary income will be reported via the K-1 reporting.     

[flyfresno]

Actually this was an ETF. I'm not sure why I am getting a K-1 for an ETF, but I am. I should provide some more info: Schwab *is* reporting the cost basis along with the capital gains on the 1099 to the IRS. So if I adjust it, it will be contrary to the info they see (it has a note right below the cost basis on the ETF clarifying that it's reported). Does that change your advice? Thanks for the reply. 

[DavidD66]

What is the ETF that issued you a K-1?  

[flyfresno]

It was from multiple "Invesco" ETF funds. 

[DavidD66]

Invesco does have a handful of ETFs that are organized/treated as partnerships for tax purposes and therefore issue K-1s.  My advice from my original answer remains the same.  You need to report the K-1.  Doing so will result in your having both capital gain or loss as well as ordinary income or loss.  Your cost basis in the initial amount paid for the shares adjusted by the total amounts of income and gain and/or the total amounts of expense, loss and distributions reported on the K-1s.  Since you sold your shares,  the K-1 package should have a sales schedule that includes the total amounts of income, gain, expense, loss and distributions.  TurboTax will guide you through reporting the sale of your partnership shares.  When entering the K-1, Check the PTP box, Check final K-1 (should be marked on your K-1), and Check sold or otherwise disposed of entire interest.  

For your 1099-B, you have to report it too because the IRS is expecting it.  Since the gain or loss was reported via the K-1 entry, you will need to adjust your 1099-B cost basis to prevent reporting the gain or loss twice.  You can do that by changing your cost basis so that it is the exact same amount as the proceeds.  How you adjust your 1099-B will depend on whether its coded with A/D (basis reported to the IRS) or code B/E (basis not reported).

• If B/E, just change the number provided by the broker.
• If A/D, there will be a page in the interview where you can make adjustments.  You should check the "incorrect basis" box and then enter the adjusted cost basis, which will be the same amount as the sales proceeds.