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prashant6524
New Member

adjust cost basis (K-1 1065) for equity sold

I bought and sold some equity in 2020. This equity turns out to partnerhsip agreement and i have now received 1065 K-1 profit on these. So say i bought for 10, sold for 15, so true profit 5. and now i have k-1 for 3.

 

So just to confirm

1) i will show 3 dollar as profit under contracts and straddle.

2) i will adjust the cost basis in 1099B and change the cost basis from 10 to 13... 

 

Question

1) how do i adjust #2 in turbo tax. do i use manual adjustment or specific adjustment. and which adjustment code do i use ???

2) how will IRS know that i adjusted this10 to 13 because of item 1, as there is no direct link to connect these two... esp given there are so many sell contracts.. i cannot adjust 1-1 but will do a consolidated adjustment per security.. is that ok? or am i supposed to do it differently...

3 Replies
martinmarks1919
Level 8

adjust cost basis (K-1 1065) for equity sold

Mike9241
Level 6

adjust cost basis (K-1 1065) for equity sold

there should have been a supplementary schedule included with the k-1 that would allow you to compute the correct tax basis.

 

there could be a column on the schedule which is labeled form 4797 or gain subject to ordinary income recapture.  this would add to your tax basis. reducing your capital gain.  

nexchap
Level 7

adjust cost basis (K-1 1065) for equity sold

@prashant6524 How you adjust the cost basis depends on whether the broker reported it to the IRS (code A or D) or didn't report it (code B or E).

 

If they didn't report it, you don't need any code.  Just change the cost they provided from 10 to 13.

 

If they did report it, then in the interview there's a spot for making adjustments, and you'd check the box that the broker's cost is incorrect (and TT will prompt you for the correct amount).  TT will take care of the codes.

 

As to how the IRS knows you made the change:  they don't.  You're responsible for reporting your taxes correctly, with the IRS having the power to audit what you turn in to verify that you did everything right.  In some cases they can look for obvious stuff (e.g., they get a copy of a 1099-DIV and match it to what you report), but with partnership accounting their ability to do automatic checks is pretty limited.

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**Note also, I'm not a Tax Preparer/CPA. Just a volunteer. seasoned, TurboTax user. Use any advice accordingly!
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