Schedule K1 and Bankrupty

[Faroukou12]

Hi

In 2016 I invested publicly traded partnership BreitBurn Energy. The 2016 K-1 showed a loss of $(4,948) and an ending capital account of $(8,949). The 2017 K-1 reported a gain of $21,976 and a ending capital account of $+13,654. In 2018,  I disposed of all the shares before the bankruptcy was finalized. The 2018 K-1 shows a loss of $(-881) and a capital account of $0.

I failed to include any of the K-1 information in any of my returns. 

How do i report these now, and what are the likely tax effects?

Thank you!

[Anonymous]

you need to amend 2016.    since it's a loss from a publicly traded partnership, it's not deductible in 2016 but the loss is carried forward maybe.  Can give you complete directions because I'm not sure what happened . t you bought into it in 2016, it  loss about $5,000 but ended up with negative capital of close to $9,000    normally ending capital would be 

purchase price

less loss 

less distributions shown on line 19

you need to amend 2017 to report the income.  again i'm not sure what happened because with negative beginning capital of $8,949 an income of $21,976 you should have ending capital of $13,027

don't know what's on the k-1 for 2018 but that and its sale need to be reported.   the basis on the 1099-B you got from the broker is probably wrong because the broker never adjust your cost for what transpires on the  k-1.  usually the partnership includes with the k-1 a supplemental schedule to figure your gain/loss on sale 

since so  many year's need to be amended  and I can't see the K-1's or any supplemental info provided, I strongly recommend you use a tax pro, who can review the info for proper reporting.   the big issue may be 2017 and 2018,    with only the info you provided it seems your taxable income for 2017 would increase by $21,976 less the $4,948.   besides the taxes you might owe, there could be substantial penalties and interest.     

[TomYoung]

I expect the unexplained difference in the ending capital balance is caused by distributions out of the partnership to you.  Those distributions typically are subtracted from the beginning capital balance - along with your attributable gain or loss - in determining the ending balance number.  A negative ending capital balance figure is treated in effect as a capital gain. 

I wholeheartedly agree with @Anonymous that you take all your paperwork - prior year income tax returns and those Schedule K-1s - to a local pro who has some experience with these things.

[Rick19744]

I agree with @Anonymous in that you need to amend your prior year tax returns.

In addition, you need to make sure you understand the K-1 and in particular the presentation of Section L; the capital analysis.

The capital analysis presentation is noted by which box is checked in that same section.  

If this is anything other than tax basis, you will need to calculate your tax basis in order to determine your overall gain or loss.

A negative ending capital account balance will only be treated as a gain if you have truly received distributions or took losses in excess of your tax capital account.  That would be unusual as (1) this is most likely a passive activity and losses limited to passive income, and (2) unlikely you would be at-risk for losses in excess of your tax basis.

I also agree that it would be in your best interest to sit down with a tax professional to work through this matter.

[Faroukou12]

Thank you all for your feedback. Yes, I agree, will go see a tax professional to sort out these issues. I guess my lesson here is to stay away from investing in publicly traded partnership. I never received a distribution, and lost all of my investment and; now dealing with the IRS.

Thanks;