My question is for a complete disposition of a PTP and how to enter it into TurboTax. After reading some responses on this community chat, it's my understanding that the Total Gain is composed of Ordinary Income Gain and Capital Gain/Loss. I assume the idea is to report the Ordinary Income Gain using the Sch K-1 forms, and report the Cap Gain/Loss on Sch D using broker 1099-B's. There seem to be two methods.
Method 1:
When in the TT forms mode, there is a Sch K-1 Partnership Addt Info 2 form. In Part II Line 4 there is a Note stating, "..,enter a sales price of zero on line 5 and a basis of zero on line 7 below. Enter the 1099-B transaction on Sch D, checking...(etc)". I do this and enter in Line 9 the Ordinary Income Gain from the Sch K-1 Sales Schedule from the PTP (I have a gain). For me, this calculates to a Long Term Loss in Line 11.
When entering 1099-B info for the PTP sale for Sch D, it is Box E checked so no cost basis reported to IRS. You ignore the 1099-B reported cost basis and instead input an adjusted Cost Basis from the Sch K-1 Sales Schedule from the PTP.
Method 2:
Read this method on the Community written by NEXCHAP around June 2019. It is all the same except Nexchap inputs a sales price of zero on Line 5 (the same), and inputs on Line 7 for the basis the opposite sign of the Ordinary Income Gain that is input in Line 9. So for example I had an Ord Inc Gain of +685 in Line 9, and input -685 in Line 7. For me, this results in a Long Term Gain/Loss in Line 11 of zero. I assume this is done to eliminate a cap gain or loss in the Sch K-1 input part of TT, and just keep the Ord Income Gain part. The cap gain or loss is taken care of in the Sch D part of TT.
Results:
End result for me when running both these methods, is I get a tax refund of say $1000 with Method 2, but a refund of about $1600 with Method 1. I assume the difference in refund outcomes is due to the capital loss calculated in Line 11 for the Sch K-1 form for TT using Method 1.
If anyone has any opinions on which is the better method or if there is another better method to follow, please educate me. thanks. I would like more of a refund, but Method 2 seems the more appropriate/accurate?
