How I report the sale of MLP shares in Turbo Tax. I sold all shares.

[nexchap]

@Loblolly - If you're doing partial sales, then you definitely can't enter the sales info into the K-1.  If you're doing complete sales, then the above should work.  The important thing is to carefully double-check what TT actually does with the info:  does all the Ord Gain show up on Form 4797; does the correct amount of suspended losses get released to Sched E; and does the correct Cap Gain/Loss make it to Sched D.  There are a lot of ways TT can mess this up, so I've always stuck to the routine mentioned as the primary answer.  But your way can work too if certain situations.

[Willie12]

Thanks for the info, but my situation is different.  When I use the Sales Schedule provided by my publicly-traded Pipeline MLP to calculate my long-term capital gain, I get a LT Cap Gain greater than the sales price.  Is this possible or is there a mistake in the Sales Schedule?  If correct, how is this sale handled.  I can't enter a negative cost.  Thanks.

[nexchap]

@Willie12 -- I think the only way that could happen is if your "Cumulative Adjustments" are more than you actually paid for the units.  And if that's that case, you probably have problems in prior year returns.

Basically, your basis in the MLP can't drop below 0.  While its above 0, you fill out your returns as normal.  But once it hits 0 (which you have to determine yourself, based on your records -- the partnership does nothing to help here), you have to fill things out differently.  And you also have to keep your own calculations on what your **bleep** Adjustments are.

This is where I suggest getting a CPA to help sort it out.  The rules are complex and require tracking both your capital as well as your share of the MLP liabilities.

[anza]

Thanks for your info on handling the sale of an MLP.  I did what you said I should with the K-1 interview.  Now I'm hoping you can tell me how do I figure out the correct cost basis from the sale so I can change the number on the 1099-B?

[Boyan]

@nexchap This is a great discussion. Thankfully I'm in the "easiest" use case where full disposition of all-long MLP took place. Based on your advice I just need to follow the K-1 interview and delete the broker's 1099-B, easy enough. 

My question is about importing .txf for the K-1 instead of manually doing the interview. Wouldn't it be easiest to just import the final sale K-1 using it's corresponding .txf file (provided by tax package support) and avoid any human error. Of course the broker's 1099-B still needs to be delete by hand, yes?

I was very meticulous in reading the discussion but I didn't see anyone importing K-1 .txf files? Why is that? I've been doing it for years on my MLP holdings and I've never entered any K-1s by hand into TT. This year is my first time of a sale of MLP hence I am putting all my past practices under scrutiny to make sure it is done correctly.

Thank you for the great information! If you have any feedback around the .tfx process please share with the community. Thanks again.

[PrG Consulting]

Do you put in the partnership basis too

[nexchap]

@Boyan:  This forum hasn't been notifying me of 'mentions' or activity in the thread, so sorry about the late response.  FWIW, I haven't done much importing because a) TT's not good at matching this year's imported K-1 with last year's carryover, which is important for updating suspended losses, or in cases where the K-1 was split (e.g., for something that had entires in box 1 and 2) and b) in the case of a sale, it doesn't import the sales schedule and c) I find that I have to go through the K-1 entry by entry just to make sure everything is getting to the right place.

Manual entry does create the risk of a typo, but I just haven't found the import method reliable enough for the reasons above.

[devnull]

@nexchap This seems to be my situation as well, where the Sales Schedule "Cumulative Adjustments to Basis" Column Total is a negative number (below 0 by a very large amount compared to the "Purchase Price/Initial Basis Amount" Column Total).  Every transaction of these SVXY shares was purchased or sold in 2018, which consisted of 6 purchased lots and 9 batches of sales.  The only data I have regarding these transactions are in my Ameritrade monthly statements, my Ameritrade 1099-B, and the Proshares K-1 packet.  There are only a few boxes in the K-1 Part III section that are populated: 

Box 5 = 151

Box 8 = 0

Box 11 = C -442,878

Box 13 = W* 203

Box 20 = A 151, B 203.

When I follow the Graphic Guide (instructions) included in the packet and plug these K-1 numbers in the TT interview mode, TT will populate the loss into Form 6781 but automatically splits the loss into 40% short-term and 60% long-term which does not negate the short term cost basis adjustment gains from the Sales Schedule, (thus making me owe a significant amount of taxes which doesn't make sense to me).

I don't know why TT is separating this loss and treating some of this as long-term since all transactions were done in 2018.  How can I fix this or how do I go about entering the Sales Schedule data so TT deals with these sales correctly?

[devnull]

@nexchap I want to clarify that my original post above is related to the situation posted by @Willie12.

[nexchap]

@devnull:  Sorry -- I'm not familiar with the intricacies of something like SVXY.  It issues a K-1 like a MLP, but beyond that I'm not sure what's the same or different.  I'd suggest posting a separate question on this.

[wstewart]

@nexchap:  I wanted to ask about an issue I have not yet seen addressed in this thread - a new issue for 2018, post-TCJA.  What happens to "excess business interest expense" (line 13K on K-1) in the year of a complete disposition of a PTP/MLP interest?

Generally, it would seem that 13K amounts would offset any line 20AF amounts ("excess business interest income"), or be carried forward into further years to offset income in that same category; this would be similar treatment to PTP/MLP losses in general.  My specific situation here revolves around EEP, which ceased to exist once ENB bought out all of its sponsored vehicles in 2018. 

It looks like this 13K amount is included in the "adjustments to basis" on both the K-1 and the Sales Schedule; however, there is no place in which this item is actually taken as a deduction (at least that I can tell).  Should this be added back to the basis in the year of a complete disposition?  Given what you have laid out previously for calculating PTP basis (thank you very much!), this would seem to be an adjustment to the "adjustment to basis" that appears on the Sales Schedule, yes?

Since this is new for 2018, it seems the IRS guidance isn't yet fully formed, and the Form 8990 that the IRS has produced to track/calculate these amounts isn't integrated into TurboTax yet.  I ended up with a capital loss from my EEP position following the ENB "buy-in" last year, and I'm trying to figure out if this 13K amount should have resulted in a larger capital loss (increased by the 13K amount).  I'd appreciate any thoughts you might have.

EDIT:  I found this post on another site (https://www.investorvillage.com/smbd.asp?mb=5028&mn=100227&pt=msg&mid=19225548) in which, at the end, the OP confronts the same issue.  His suggested solution (emphasis on "suggested") is to add the 13K amount to the Line 1 amount (adding expense to a loss, to create a larger Line 1 loss).  The core issue here would seem to be whether this is considered an ordinary income/expense item, or a capital gain/loss item.  Upon reflection, his idea seems to make more sense.  But adjusting Line 1 (which is fixed and reported) rather than basis (which even the IRS expects to vary) seems risky to me.

FURTHER EDIT:  Appear to have found the answer.  In the proposed IRS regulations for this matter (https://www.irs.gov/pub/irs-drop/REG-106089-18-NPRM.pdf), the IRS states (on pages 267-268) that, for a complete disposition, "the adjusted basis of the partnership is increased immediately before the disposition by the amount of the excess."  So it would seem that my original thinking was right after all?  Unless I'm missing something?

[Boyan]

@gaili-zhao Hey if i may ask respectfully how did you end up E-filing your E*Trade erroneous A-coded cost basis on 1099-B?

Did you file with the discrepancy in place (between the erroneously A-coded 1099-B cost basis and the correct one from final K1) expecting a letter of explanation and if yes did such letter ever materialize?

If you didn't take the risk of the discrepancy how did you resolve it? If E*Trade reported A-coded defective basis then did you just take the hit and pay unnecessary (presumably higher) income tax at the end?

Thank you

[nexchap]

@wstewart:  My apologies for the late reply.  This forum is pretty spotty about sending email notifications when threads are updated, and I don't check in very often before Feb/Mar.  But what you eventually concluded seems right to me.  And I appreciate you posting the research you did, because I'd have had to go down that same path to figure it out for myself (I've got one to deal with for 2019 as well)!

[GoodShip]

nexchap

Interesting discussion on  "lot selection" in MLP sales, but confusing. Let me throw a monkey in the wrench on this, and get your take. A few years ago, the IRS changed the way MLP unit sales are reported by default,  to  unified basis in the total partnership interest, Ruling 84-53. From my understanding, when "Reporting a Partial Disposition of an Interest in the Partnership",  the units sold are not treated like a block of stock would be handled, either first-in, first-out, or by identified block. The IRS considers that a partner has a unified basis in the total partnership interest, and that a partial sale of the total interest represents a partial sale of each portion of the interest acquired in separate transactions up to that point.

To determine the adjusted basis of the sold units, the total original basis from all purchases would be pro-rated, per the percentage of the total holding sold, to get the original purchase basis of the sold units. Then, the cumulative adjustments to basis value supplied by the partnership would be used to determine the adjusted basis of the sold units. From that point, the sales proceeds and the ordinary gain as reported by the partnership would be used as described preceding.

Are you certain investors can still use "specific lot" selections in MLP sales at the broker level, and match them and thru the K1? Thanks

[Anonymous]

generally, column 8 is not 1250 but ordinary income reported on form 4797 line 10 (should be indicated on sales schedule)   how to enter this.   but from what I  can see you need to do the following.  on the sales supplement of the k-1 show  the sales proceeds as the ordinary income (line 5 and ordinary income (line 9). do not report the capital gain/loss here. 

the 1099-B will be wrong in that the cost basis will be what you originally pay not your adjusted tax basis.  you'll need to adjust this so you come out with the capital gain as shown on the sales schedule.