UCO K1-am I doing the right thing?

[MST2]

Hi...I have been reading all the threads on how to handle K1 for publicly traded partnerships like UCO (and USO). My best understanding is that I use TT K1 interview  to report any "interest" (box 5 of K1), CG(L) (box 8), "Other Income" (box 11) and "other deduction" (box 13). This part seems to be straight forward. But then I use the "Sales Schedule" that comes with the K1 to make adjustments to (override) the Cost Basis ....i.e. change what shows up on 1099-B to what shows up in column 6 of the Sales Schedule.

Question 1: How am I doing so far?

Another issue is, in column 4 of the Sales Schedule, the purchase price (initial Basis) is completely different from what's on 1099-B (which is correct and is what I actually paid for the batch bought on that date). I have no idea why there is a large difference. My purchase pattern is simple. I buy 100 shares and then sell it before I buy another 100 shares....

Question 2: Do I ignore this and make adjustment to cost basis using the new cost basis that is in column 6 of the Sales Schedule?

I can provide screen shots, etc. if needed. I will wait for some feedback before I add a couple of other questions.

Thanks  in advance to whomever will help me...  

[nexchap]

It sounds like you're handling the K-1 properly.  On the purchase price, your own records are what you should use.  The partnership is simply reporting what someone else told them, so if its mistaken they'll correct it with whatever number you want to provide (not that you need to correct it).  So you'd use your purchase price, and the K-1 Sales Schedule col 5 ("Cumul adj to basis") to work out your correct cost basis.

[MST2]

Thanks for the feedback. I think I get it. To make sure I do, the only thing I should take from the "Sales Schedule" that came with K1 is column 5 (adjustment to basis). Ignore their corrected cost basis. Simply use their adjustment to adjust the cost basis that is reported on 1099-B (which agrees with my records). Is that correct?

Assuming you say yes, here is the next question specific to how TT handles my adjustment....I make the adjustment by editing the specific trade, checking the box (Cost basis in my statement is incorrect) and then provide a new cost basis in the box that appears. I have noticed that on form 8949, the adjusted cost basis shows up in column e, but the net adjustment shows up as 0 in column g. In short, all is good except that the IRS person my think that I made zero adjustment and then flag the new cost basis as an error because it is different from what is in 1099-B! Is there a way to get TT to report the actual $ adjustment to the cost basis?

Thanks again....

[nexchap]

The 1099-B you received should be coded B or E.  That is, its a trade where the broker reports the revenue to the IRS, but not the cost.  They do that because they recognize that they don't have the right cost:  they don't see the K-1.  That's why you can simply change the basis and not worry about the $0 under adjustments.

If they had actually reported the basis to the IRS, and there was a specific reason you wanted to adjust it, then their are various codes you can use to show the reason and the amount.

[Mike9241]

MLP reporting k-1 and 8949

Please follow these instructions. Incorrect entries can result in entering the sale twice or otherwise incorrectly. Also see the sales schedule that was included with the k-1

Enter the k-1 info

Check the PTP box

If total disposition proceed as follows:

On the k-1 disposition section for sales price use the ordinary income (sometimes you’ll see a column with the “751” or the words ”gain subject to recapture as ordinary income” if 751 income is reported as 0 enter 0

Cost is zero

Ordinary income is the sales price.

This info flows to form 4797 line 10 and is taxed as ordinary income.

Now for the 8949.

The broker’s form is probably coded as B or E – sales proceeds but not cost basis reported to the IRS. This is because the broker does not track the tax basis. It used what you paid originally which is not the correct.

The correct tax basis is:

What you paid originally, should be the same as what is on 8949,

Then there is a column on the sales schedule that says cumulative adjustment to basis. If it’s positive add it to the original cost. If it’s negative subtract the amount 

Finally add the amount of ordinary income reported above.

The result is your corrected cost basis for form 8949.

Some other things. Look at lines 20Z1. That number should be added to the ordinary income above for reporting the 199A (qualified business income from the PTP). You don’t have to enter this but the you lose out on a tax deduction = 20% of this amount.