Do I need to ignore the loss shown Box 11C of Schedule K-1 from USO fund?

[MGuercini]

I had -$12,550 (loss) on my Schedule K-1 Box 11C for 2020. I think it was ignored by TurboTax. It didn't seem to have any impact on my taxes. For 2021 I have $13244 in the same box. When I do my 2021 taxes I am getting hit with a large tax. The schedule K-1 is from USO fund (partnership). When there is a negative figure (loss) I have to ignore it, but next year when there is a gain I have to pay taxes on the gain. Is this normal? Thanks for any help in advance.

[ThomasM125]

That would be a loss on involuntary conversion, which is deductible by a business as a casualty loss. A casualty loss is not allowed under current tax law for an individual unless it stems from a federally declared disaster. So, the loss is probably not deductible on your tax return.

A gain, however, would be taxable, that is just the way the law works. You can read more about it here:

Involuntary Conversions

[MGuercini]

Thanks for quick reply. Unfortunately  I made a mistake. My value for this year is positive, not negative (that was last year's K-1). I read on this forum that a positive amount in this Box 11 (with code C) is taxable income, but it is added to the cost basis when the fund is sold. Is this true and can TurboTax handle this situation? I just put the correct Schedule K-1 into TurboTax, but the income is showing up as "Contracts and Straddles" and Schedule K-1section showing a value 0. I think this is because of the Box 11 code "C". This doesn't look right. Any thoughts ?

[AliciaP1]

It does show up as "Contracts and Straddles" because it is identified as code C. 

Per the IRS Instructions for Schedule K-1:

Section 1256 contracts and straddles (code C)

As defined by the IRS:

Section 1256 Contract A section 1256 contract is any: • Regulated futures contract, • Foreign currency contract, • Nonequity option, • Dealer equity option, or • Dealer securities futures contract. For definitions of these terms and more details, see section 1256(g) and Pub. 550

[craftindo]

Alicia,

You didnt answer his question. Since, the positive value affects the current return so it means i pay the tax now. In the future, when i sell the stock, will TT compute it correctly or do i have to do anything so that i dont get double taxation? (considering i pay the tax now even though it is NOT yet realized)?