Annual how do I enter sale of MLP question

[spoede1026]

Thanks very much, @nexchap . Y'all's instructions finally make sense. I sure wish TT would clean this up to make it more straightforward. MLPs are, after all, fairly commonly owned.

If you have an "in" with TT management, another issue that they need to clean up is Amended Returns. That's a disaster. Last year I had to prepare and file one, and TT pulled wildly incorrect info from my original return. Numerous posters over several years have complained about the same problem but TT just seems to ignore the issue.

But, nevertheless, thanks for your help.

[Stumas11]

I am struggling with this as well. 

I am using the desktop version of TT on a Mac. The sale is a complete disposition/Final K-1.

After following Mike9241 's very clear instructions on the entry of K-1 information in the disposition section of the K-1 form ("K1P Addl info"  worksheet form in TT) the info doesn't "flow to form 4797 line 10 and is taxed as ordinary income".  Instead it flows to a new 8949 as a Box F sale (Long term transaction not reported on a 1099B). This ends up being a second entry of the sale, only this time with amount of recaptured gain from Column 7 of the K-1 Sales Schedule being Long-term gain.

I have filed an extension so I have time to sort this out, but it's driving me crazy. Help please!

Thanks,

Stuart

[Stumas11]

to Spoede1026 @spoede1026 

I have been struggling with the reporting of a complete sale of an MLP.  I'm using the desktop TT on a Mac. When I followed Mike9241's instructions for the disposition section of the K-1 form I ended up with the info going as an additional long-term sale on a 8949.

I saw a reply from you on this thread that you and others have had this same problem. Then I saw your response to  "@Mike9241 After doing what you recommended, you are spot on! Thanks Mike."  I couldn't figure out what his additional recommendation was. Have you resolved your issues with MLP sale reporting?

[spoede1026]

Stumas11:

My understanding of his recommendation is to modify the information in the 1099-B by deducting the amount in the K-1 entitled "Cumulative Adjustments to Basis" from the Purchase Price (the basis)on the 1099-B. That will provide a correct amount for your basis and, even though it is a different number than reported on the 1099-B it will not trigger any alarms with the IRS because the basis of these investments is not reported by your broker.

I then removed all sales data from the K-1 form in Turbotax except that I entered the "Gain Subject to Recapture as Ordinary Income" as the Sales Price in TT.

That's my understanding of what the above posters were recommending and it makes sense because:

1. It ends up with your sales transaction in only one location on your return.

2. It accurately reflects the correct gain/loss from your sale of your MLP. 

3. It accurately puts the "Gain Subject to Recapture . . ." on your return making it subject to taxation.

[nexchap]

@spoede1026 @Stumas11 the correct cost on the 1099b is purchase price + adjustments to basis + ord gain.  

[jet-setter]

Hi All,

My understanding of how to enter all this information is as follows:

-Enter All K-1 information as you normally would.

-When entering the Sale into Turbo Tax, list the "Partnership Basis" as 0, the selling expense as 0, and the Sale Price is the number in Box 7 of the Supplemental Sale info sent in your K-1, this is called "Gains Subject to Recapture as Ordinary income". Leave the Box labelled "1250 Gain" empty.

Does this seem correct?

Thanks for your help!

JS

[DLWit5]

This is happening to me too!  I followed the instructions to a "T" but it's doing the same thing and reporting the amount of ordinary gain on Form 8949 as Cap. Gain.  Not sure what is happening.  Will do the same thing and send in my check, but need to sort out.  Just saw some late replies so will revisit.  Why do they make this so complicated?  

[jet-setter]

The instructions listed on the K-1 are also quite helpful.

[DLWit5]

That makes sense to enter the ord. gain as a negative; however, I have a negative basis before the ord. gain, and the Cap Asset W/S won't let you enter a value less than zero.  It is easier just to add the basis and Ord gain together and enter that as the basis, as this is a positive number.  And, as others have pointed out, this should not be a flag, as the basis is not reported to the IRS.  

[nexchap]

@DLWit5 @jet-setter A couple things:

• The goal in the K-1 interview is to make sure that it doesn't calculate any Cap Gain/Loss in that section.  You know you've got this right on the screen AFTER the "Enter Sale Information" screen -- the one titled "Review Investment Gain or Loss on Sale".  If this shows "zero" everywhere:  success.  If it shows any gain or loss, TT is going to mess up your return, and it will create extra 8949 entries to report that gain/loss.  You don't want that.
• The method to do that:  setting Sales Price to equal Ord Gain, or entering the inverse of Ord Gain as basis, is personal preference.  The only argument for the latter is that it works for the AMT column as well.
• Once that's out of the way, all that remains is setting the basis to the right number on the 1099-B.  Since basis probably wasn't reported to the IRS, you can just change it without using codes or adjustments.
• @DLWit5 You mention having a negative basis before adjusting for Ord Gain.  That's a problem.  If you've held onto the investment so long that you're cumulative adjustments exceed your purchase price, you were supposed to change the way you handled the K-1 in the year that happened:  disbursements needed to be reported as LT Cap Gain, and losses were potentially lost rather than suspended.  The accounting is complicated, and TT doesn't handle it well, so if this is your situation you may want to review with a professional.

[fanfare]

• Once that's out of the way, all that remains is setting the basis to the right number on the 1099-B.  Since basis probably wasn't reported to the IRS, you can just change it without using codes or adjustments.

@nexchap 

Not correct. 

If you change the basis shown for Box B or E transactions, you enter Code "B" on Form 8949 and "-0-" in column (g).

[mwh1]

When I try to override the tax basis on 8949 as you suggested for an MLP sale, TT tells me that I can't change those numbers (apparently because they are carried onto 8949 from somewhere else that they were orginally entered).  

I fundamentally don't understand why a work-around is needed to process an MLP sale in the first place?  

My inclination is to follow the interview process and put in the numbers that are shown on the sales schedule.  If I do it that way, am I getting doubled taxed or something?  What about TT's accuracy guarantee?

I know you've patiently helped people with this over several years, but I don't understand why we need to do the work-around?   Your insight would be much appreciated. 

Thanks for your patience and helpfulness!

[nexchap]

@mwh1 I can't speak to why this hasn't been fixed (I'm trying to make that happen), but I guarantee if you just follow the interview you'll double-count your gains and potentially introduce other errors.

There is an opportunity in the interview for investments (where you import and edit 1099-Bs) that allows you to change the cost basis.  Alternatively, in Forms, there is now an adjustment worksheet that is accessed on the 1099-B form, when you double-click on the adjustment box.  You don't edit Form 8949 directly, or override any other values.

[mwh1]

Presuming I did this correctly, you just saved me a bundle -- thanks again!!

Still cannot understand why TT doesn't do this.  Seems simple enough:

"Some other things. Look at lines 20Z1. That COLUMN 7 AMOUNT/20AB should be added to the ordinary income (or netted if 20Z! is negative) for reporting the 199A (qualified business income from the PTP). You don’t have to enter this but then you lose out on a tax deduction = 20% of this amount."

[mwh1]

Hi Mike,

I sold CEQP right before it was acquired by ET.  (Bad move I know.)

Anyway, I owned it for ~two years.  Received about $24K in distributions.  I paid $203K for it and sold it for $190K -- so simplistically gained about $11K ($190 +$24 = $214.   $214-$203 = 11K.)

What seems crazy is the K1 reports almost $84K in "gain subject to recapture as ordinary income."  

Does that any sense at all to you?  Thanks again!