MLP K-1 Long Term Sale - How Do I Enter K-1 and 1099-B???

[chiefs19]

I purchases shares in a MLP back in 2011, not realizing what I was getting into at tax time. The purchase and distributions, which were reinvested. Distributions stopped several years ago. I sold ALL shares on 11/22/2021 and residual shares sold on 11/24/2021 for a capital loss. 

I downloaded the Turbo Tax package from the MLP and imported it in TurboTax Premier 2021. I have been able to file the taxes in Turbo Tax each year, but selling/liquidating all the shares is much more complicated. Even though I took a large loss (large for me), TurboTax shows I owe a substantial amount in Federal taxes.

This is the first and only time I sold shares, so I have never dealt with the MLP Sale Schedule and corresponding 1099-B resulting from the sale.

Below is an example of my Sale Schedule and 1099-B information.

Below is the information that I have entered:

- Choose the type of Partner: Limited Partner or Other LLC Member

- Choose the Type of Partner, Both of Us are a: Domestic Partner

- Enter the Percentage of Your Share: Percentages entered from of K-1 Section J (All Ending fields 0%)

- Enter Your Liability Share: Amounts entered from K-1 Section K (All Ending fields $0)

- Enter Capital Account Information: Amounts entered from K-1 Section L (Ending capital account $0)

- Describe Partnership:

--- This is a publicly traded partnership. (checked box)

--- This partnership ended in 2021. (checked box)

- Describe Partnership Disposal: Complete disposition

- Tell Us About Your Sale: What type of disposition was this? - Sold Partnership Interest

- Enter Sales Dates

---Purchase Date: 09/08/2011

--- Sale Date: 11/22/2021 (I used this date since this was when my sale order was executed. 11/24/2022 is when the residual shares were sold).

Enter Sale Information: I am not sure what to enter into these fields.

Regular Gain or Loss	AMT Gain or Loss
Sale Price: __________
Selling Expense: __________
Partnership Basis: __________	Partnership Basis: __________
Ordinary Gain: __________	Ordinary Gain: __________
1250 Gain: __________	1250 Gain: __________

Describe the Partnership: All of my investment in this activity is at risk.

Any help that can be provided would be greatly appreciated! Thank you!

[Mike9241]

you see column 6 it's negative. this may mean you misreported in prior years.   when tax basis goes negative that means net losses exceed your tax basis making them non-deductible or distributions exceeded your tax basis which would result in your needing to report a capital gain in the year it happened.  or it could be a combination of losses and distributions that caused this.     I'm going to ignore this unless you want to hire a pro to review prior reporting and file amended returns if need

for the k-1

need to indicate final

also need to indicate complete disposal

then you need to use the k-1 link to enter certain disposition information

most should be self-exlanatory

when you get to the sales price only enter the amount in column 7

cost = 0

ordinary income same as column 7

all this will flow to form 4797 line10 and be taxed as ordinary income

on the 1099-B you need to adjust the cost information. it's wrong because brokers do not get any info to enable them to adjust for the partnership activity

your sales price is the $2810

tax basis $3986 what you paid less $5069 what you got in income, losses and distributions plus  the $2228 of ordinary income = $1145 resulting in LTCG $1665

total ordinary gain and capital gain (just an FYI) $2228 + $1665 = $3893

this is your sales proceeds $2810 plus basis adj of $5069 (net income and distributions) = $7879

less your original tax basis $3986 ($7879 less $3986 = $3893)

as you can see dealing with a PTP is a pita

what's worse about many PTPs is that the longer you hold them 

the larger column 5 becomes and column 7 also increases by about the same amount. 

had a client that held a PTP 10 years or so.   ordinary losses for that period were about $10K which couldn't be deducted due to the passive loss rules for PTPs. when sold column 7 was $50K so net ordinary income in the year of sale was $40K which made more of social security taxable and had other adverse effects on the return.

[chiefs19]

Hello Mike9241, 

I appreciate your response, but I am still struggling with this and what I need to enter. Obviously, getting into an MLP is way beyond my expertise and I should have just stayed with stocks.

In reading back through your first paragraph, I made my initial purchase on 9/28/2011 and a second purchase on 5/17/2012. I received distributions (dividends) quarterly up until 2/12/2016 that were always reinvested in new shares. This is the only sale that I have made and it was to liquidate the shares and get out of the MLP. I have owned shares in the MLP for a little over 11  years,  which is 12 years too long in hindsight.

I have been using TT Premier every year to file my taxes based on the K-1 provided the company. I even had someone at TT audit my taxes the first year just to make sure I completed them properly. He found no issues and said everything looked great. I do not understand the negative amount in column 6 and how I could have misreported in prior years. The company was close to filing bankruptcy a few years ago, so it had a lot of losses. It changed CEO and CFO and then started on a course of recovery. Eventually the price went up enough for me to liquidate before then of 2021 to finally get out.

I checked the following buttons/boxes:

• Limited Partner or Other LLC Member
• Domestic Partner
• This is a publicly traded partnership.
• This partnership ended in 2021. 
• Complete disposition
• Sold Partnership Interest

Enter Sales Dates:

Purchase Date: 09/08/2011

Sale Date: Would this be the date I initiated the sale (11/22/2021) or the date the residual shares were sold (11/24/2021)?

Regular Gain or Loss	AMT Gain or Loss
Sale Price: __________
Selling Expense: __________
Partnership Basis: __________	Partnership Basis: __________
Ordinary Gain: __________	Ordinary Gain: __________
1250 Gain: __________	1250 Gain: __________

I am still trying to figure out what to enter in these fields, especially considering that my 1099-Bs were downloaded from my brokerage firm.

From your response:

for the k-1

when you get to the sales price only enter the amount in column 7 (column 2,228)

cost = 0 (is this Purchase Price / Initial Basis Amount column 4?)

ordinary income same as column 7 (is this Ordinary Gain?)

all this will flow to form 4797 line10 and be taxed as ordinary income

- Is all of this entered under Regular Gain or Loss?

-What about AMT Gain or Loss?

I kind of follow what you state in your response regarding my 1099-B, but I do not know how to go about adjusting the 1099-B form in TT.  This is my first sale of a MLP and I have never encountered any of this before.

I appreciate any help and guidance you can give me. Thank you!

[Stumas11]

Hi Mike, 

I came across this topic in preparation for selling and reporting my MLP shares this year.

I am facing the situation as a long-time TurboTax user but as a "newbie" for reporting the sale of publicly traded MLP units during the 2022 tax year.

My question is whether the reporting of a sale of MLP shares in TurboTax really that difficult in most cases? Should I bail on using TT next year and hire a CPA for the first time in 20+ years?

My situation seems relatively simple:

       All units purchased at one time in 2014, and sold as one sale in 2022

I usually use the downloaded (desktop) version of TT in the Mac Deluxe version. Does this version adequately cover MLP sales, or would I be better off upgrading to the Premier version?

What information beyond the purchase price and sale price will I need to enter the sale:  Distributions? Business income losses from previous K-1's? Carryover losses? etc?  Does the final K-1 and/or brokerage 1099 usually include most or all of the required information?

The only thing that may be a confounding issue is that the units were originally purchased by my wife several years prior to our marriage and the K-1 info for those years is on her personal tax returns, while only the last 3 years are on our joint returns. I mention this because I don't know if carryover cumulative business income losses are part of the tax calculation?

Thanks in advance for your input. I'd really like to stick to using TurboTax and doing my own tax returns.

[Mike9241]

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