topic Using Prior Period losses following a partial sale of a MLP / PTP in Get your taxes done using TurboTax

Using Prior Period losses following a partial sale of a MLP / PTP

daveb5 — Thu, 26 Mar 2020 16:57:46 GMT

I've done a partial sale of a publicly traded master limited partnership. In the past, I've only been allowed to reclaim prior year losses to the extent that they offset the current year's operating income from the MLP. My understanding is that all of my prior year's losses will be reclaimed when I liquidate all of my interest in the MLP. This year I have both operating income and ordinary income resulting from the partial sale. TurboTax is using all of my prior year losses this year even though these losses exceed the current year's operating income. Is this because I'm allowed to use prior year losses to offset the ordinary gain from my partial sale? Or is there a problem that the program isn't recognizing that this is only a partial sale, not a complete liquidation?

Re: Using Prior Period losses following a partial sale of a MLP / PTP

nexchap — Tue, 14 Apr 2020 17:55:39 GMT

Go to Forms mode and look at the K-1 for the MLP in question. Scroll down to 'Section A', which is the Passive Activity Adjustment. Column 'a' shows you any passive gain/loss from 2019. Column 'b' shows the carryover from prior years. Column 'c' is going to show any values that are 'allowed' this year. So if you had $1000 in Ordinary Gain, you'd see that $1000 'allowed'. And you'd see ($1000) in losses, on other lines of the form, that offset it. The important line is the Total at the bottom. For a partial sale, the total should be >= $0. Only in a complete disposition is that line allowed to be <$0.

So if you used all your suspended losses, but are still reporting a total $>0, you should be fine. But if its <$0, make sure you didn't accidentally tell TT that you did a complete disposition.

Re: Using Prior Period losses following a partial sale of a MLP / PTP

cr0ne — Sun, 26 Mar 2023 05:42:17 GMT

Interesting. I thought it was not allowed to use passive loss to offset ordinary gain?

I thought you essentially just need to "eat" the ordinary gain (ie, pay tax on it), and the passive loss continues to carry-over. This is specifically in reference to a partial sale.

Re: Using Prior Period losses following a partial sale of a MLP / PTP

nexchap — Sun, 26 Mar 2023 14:34:15 GMT

@cr0ne Ordinary gain is passive income generated by the partnership, and is available to offset passive losses from the same partnership.