Annual how do I enter sale of MLP question

[PatriciaV]

Accurately reporting PTP/MLP income and transactions in TurboTax involves several steps:

Step 1: Gather your tax documents:

• Form 1099-B: Reports the sale of stocks, bonds, mutual funds, and other securities.
• Schedule K-1 from the PTP/MLP.
• Supplemental information provided by the PTP/MLP detailing income recapture (included with K-1).

Step 2: Entering Schedule K-1 Information
TurboTax Online:

• Log in and open or continue your return.
• Go to K-1.
• On the Schedules K-1 or Q page, select Yes.
• On the Did you receive any Schedules K-1? page, select Yes.
• Select Start next to the type of Schedule K-1 form you have (Form 1065 for partnerships), and enter/review your information.

TurboTax Desktop:

• Open TurboTax and continue your return.
• Select Search Topics. Search for and select K-1.
• On the Schedules K-1 and Schedule Q screen, select Yes.
• Select Start next to the type of Schedule K-1 form you have (Form 1065 for partnerships), and enter/review your information.

Enter PTP/MLP Details:

• Confirm/Enter the partnership's Employer Identification Number (EIN) and other relevant information as shown on your Schedule K-1
• Check the box for “This partnership ended in 20XX.”
• Choose “Complete disposition” or "Disposed of a portion..."
• Choose “Sold Partnership Interest.”
• Enter original purchase and sale dates.
• Enter Sales information from Schedule K-1 Supplemental Information.
  Note: Since you received a 1099-B for this transaction, it's important to make sure $0 of Capital Gain is reported on the K-1, as follows:
  • Sale Price = zero
  • Partnership Basis = amount of ordinary gain from Supplemental Info multiplied by -1 (ie: reverse the sign).
  • AMT Basis = amount of ordinary gain for AMT from Supplemental Info multiplied by -1 (ie: reverse the sign).
  • Ordinary Gain = gain/loss per Supplemental Info.
• On the screen "Review Investment Gain or Loss on Sale," verify that this screen reports all zeroes. This is the expected outcome if your entries are correct.

Input Income and Deductions:

• Enter amounts from each box on your Schedule K-1.
  • Box 1: Ordinary business income/loss.
  • Box 20 (Code 2): Section 199A information.
  • Box 20 (Code AB): Section 751 gain/loss
  • Passive Loss Carryovers as negative numbers (regular, AMT, QBI).

Step 3: Entering Form 1099-B:

• Navigate to the 1099-B section:
  • TurboTax Online/Mobile: Go to 1099-B.
  • TurboTax Desktop: Search for 1099-B and select the Jump to link.
• Follow the onscreen instructions. When you reach "Let's import your tax info," choose how you want to enter your 1099-B:
  • To import your form: Select your brokerage or financial institution from the list. Enter your sign-in credentials for your account, then select "Get my form."
  • To enter your 1099-B manually (recommended): Select "Enter a different way," then select your investment type on the next screen.
• On the following screens, answer the questions about your 1099-B. When you reach the "Review your sales" screen, the form you just imported should be listed.
  • Otherwise, to add another 1099-B, select "Add investments." 
  • Select "Continue."
• Enter the details from your Form 1099-B (separate long-term and short-term):
  • Note: If the K-1 Supplemental Information has separate long-term and short-term sales, allocate the 1099-B information between the two, using the percentages provided on the K-1 Supplemental Info.
  • Long-term/Short-term basis not reported.
  • What investment did you sell [Stock (non-employee)]
  • Description: "Sale of [PTP/MLP Name] Units."
  • Date acquired & sold.
  • Proceeds from sale: (portion for this section, if allocating).
  • Cost basis:
    From K-1 Supplemental Info: Original Cost plus/minus Cumulative basis adjustments plus/minus Ordinary Gain/Loss from Section 751.
  • Example:
    • Original Cost = $100,000
    • Cumulative adjustment to basis = ($20,000)
    • Ordinary Gain = 15,000
    • Adjusted Cost Basis to enter = 100,000 - 20,000 + 15,000 = $95,000
  • No special situations.
  • Result should equal Capital Gain/Loss from K-1 Supplemental Info.
  • Add another sale for short-term, if allocating

TurboTax will report the capital gain or loss on Schedule D (Part I - Short-term; Part II Long-term) and ordinary income on Form 4797 Part II Line 10.

@nlavery 

[edited for clarity 3/5/25 | 12:40 pm]

[INSPECTORBOBONE]

Thanks to everyone for their great input!

PatriciaV, can you please clarify the  Original Cost in the section "Enter details from your form 1099-B."  According to your post, you state that the Original Cost comes from the K-1 Sales Worksheet ("Supplement"). 

That is far different than what I actually paid, and what is shown on the 1099B.  I just wanted to verify that we are to use the Worksheet Initial Basis amount (Column 4), and not what was actually paid.  Please advise.  Thank you!

• "Cost basis:
  From K-1 Supplemental Info: Original Cost  plus/minus Cumulative basis adjustments plus/minus Ordinary Gain/Loss from Section 751.
• Example:
• Original Cost = $100,000
• Cumulative adjustment to basis = ($20,000)
• Ordinary Gain = 15,000
• Adjusted Cost Basis to enter = 100,000 - 20,000 + 15,000 = $95,000"

Also, under "Input Income and Deductions: .....Box 20 (Code 2): Section 199A information."  shouldn't that read "Code Z" instead of "Code 2"?

Thank you!

[nexchap]

@INSPECTORBOBONE For original cost, you should default to your records.  The K-1 preparer doesn't see the original purchase records, so they use whatever number the broker sends them.  If you contact the K-1 preparer, they'll usually correct and reissue the K-1 (optional).  But also note that the 1099-B can't always be trusted either.  That's because some brokers may adjust your original cost for any return-of-capital distributions, which isn't at all helpful because those are also in the K-1 adjustments.  So bottom-line, adjust the 1099-B using your records for cost, and the adjustments given on the K-1.

@PatriciaV 

[INSPECTORBOBONE]

Nexchap, can you please clarify something in your example.  Your formula states:

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

Cumulative adjustment to basis (column 5): -$12,932 

Cost Basis (column 6): $87,155 

Gain Subject to Recapture (Column 7): $18,229

(Basis = $92,452)

But why are you using Column 6, "Average Cost Basis" as the "Purchase Price"?  Shouldn't you use Column 4, "Average Purchase Price/Initial Basis Amount"?

Cumulative adjustment to basis (column 5): -$12,932 

Cost Basis  (column 6): $87,155 PURCHASE PRICE: (column 4): $100,087

Gain Subject to Recapture (Column 7): $18,229

Basis = $105,384

What am I missing?

Thank you.

[nexchap]

@INSPECTORBOBONE In rereading that, it looks like I just made a mistake in grabbing numbers and trying to create an example.  Your corrections are correct.  Thanks for pointing it out.