Final K-1 (Form 1065), Form 8949, Transactions reported on 1099-B

[tksprabu]

I have my final K-1 form, this has the adjusted cost basis for the investments I sold this year.   My brokerage has included these transactions on 1099-B as E - Long-term transactions reported Form 1099-B showing basis wasn't reported to the IRS.  I am not including the brokerage reported transactions, but using the K-1 to report this sale.  (Form 1065)

When TurboTax generates Form 8949 for these transactions "option F- Long-term transactions not reported to you on Form 1099-B" is checked. This needs to be "option E - Long-term transactions reported Form 1099-B showing basis wasn't reported to the IRS". I am unable to edit Form 8949 or change the reporting basis in another way. 

Please help.

[nexchap · Accepted solution]

You'll want to use the broker's 1099-B, since they're reporting the revenue to the IRS.  You simply edit the cost to the correct basis (using your K-1).

Because you're using the 1099-B for the Cap Gain, you'll want to keep this out of the K-1 interview.  Do this by:

• Enter $0 for Sales Price
• Enter Ordinary Gain in the Regular and AMT columns
• Enter the inverse of Ord Gain (e.g., -100 if Ord Gain was 100) in the Basis columns for Reg and AMT

On the next screen your Regular and AMT Gain/Loss will all be zero.  This keeps TT from creating a new 1099-B.

[Mike9241]

since you sold the PTP the broker reports on the 1099-B as cost the only number they have - what you paid originally. that is not your correct tax basis. accompanying the k-1 should have been a supplemental schedule which you need to use to report your correct tax basis 

[tksprabu]

Thanks for your response. I did update like as explained by you - now TT does not generate 8949 for this. 

Why can't I enter the sale price as actual and match the cost basis to get zero profit/loss? How that will be different from the method given above?

[nexchap]

@tksprabu You also have to account for the Ordinary Gain.  If you enter 100 for sales, 100 for basis, and 40 for Ord Gain, TT is going to calculate a Cap Loss of -40.  That gets you an 8949 for that Loss, plus the potential for other errors because of a bug in TT.

Note that the important thing is to prevent TT from calculating any Cap Gain/Loss in the K-1 interview.  You can enter the numbers in any way that makes sense to you, as long as the end result is $0 and no new 8949.

[tksprabu]

@nexchap  Even though the method described first did not generate from 8949, it added Form 4797 showing a total loss. This does not look correct and reduced my tax liability.

If I add the sale price and exact amount as basis then it does not generate Form 8949 or Form 4797. Now it appears to be correct. 

Any comments? Thank you.

[nexchap]

@tksprabu Its not clear what you're actually doing.  You may want to supply an example.  But regardless, you should expect to see your Ordinary Gain reported on form 4797, any some suspended losses released on Sched E, and the correct Cap Gain/Loss on Sched D.  Your best bet for getting the right answer is to make sure you know what those numbers are supposed to be, before you enter everything into TT, and then verify that they've shown up correctly.

[tksprabu]

@nexchap  Here is the situation. 
My purchase price was $21487. I sold at $21175.  (Loss of -312)
My brokerage reported the cost basis as 21487 in Form 1099-B Box E (Cost Basis not reported). 

Form K-1 reports my cost basis as $19576. 

In TT I entered $19576 as cost basis in Form 1099-B, Box E (Gain of $1599 - which is correct). For K-1 I had entered in 2 methods.  The Gain/Basis method generates Form 4797 and adds $-312 to Schedule D, which reduced my tax.

With Sale price and Basis same, I don't have that problem. 

Thanks for your guidance.

 As described by you earlier.My own method.

[nexchap]

@tksprabu I think you're confusing "Ordinary Gain" with "Capital Gain".  "Ordinary Gain", or "Gain Subject to Recapture as Ordinary Income", shows up on your K-1 Sales Schedule.  If its not there, then you don't have any.  If it is there, it'll be a positive number and has nothing to do with the -312 difference between your sales and purchase price.

If your sales schedule doesn't mention Ordinary Gain, then just enter 0 for sales and 0 for basis on the K-1 (or 21,175 and 21,175 -- doesn't matter) and you're done.

[VMOO]

For 2022 Tax reporting, I’ve received 4 Schedule K-1 and K-3 (3 of them the Final K-1 box are checked) for the ETFs that I traded throughout the year. On 1099-B all 4 ETF are SHORT-TERM TRANSACTIONS FOR WHICH BASIS IS REPORTED TO THE IRS. (Report on Form 8949 Part I, with Box A checked.)  Since I am a day trader, there were many transactions on my 1099-B, so I entered a summary for each sales category for all the trades that I made throughout the year.  

On Schedule K-1, the 3 ETF with final K-1 box checked, under PART II BOX J  Partner’s share of profit, loss, and capital are all 0.000000%, if decrease is due to sale or exchange of partnership interest BOX is checked. Under BOX L the Partner’s Capital Account Analysis Beginning capital account and Ending capital account are both $ 0, with complete Withdrawals and distributions from the Capital contributed during the year. Under the Part III BOX 5,8,11,13,16 and 20 are all 0, BOX 11 code C, BOX 13 code W, BOX 16 box checked and  BOX 20 code A and code B. On the K-3, the foreign income and taxes are all 0. 

On the ETF without final K-1 box is checked, under PART II BOX J  Partner’s share of profit, loss, and capital the Ending is with a positive %, if decrease is due to sale or exchange of partnership interest BOX is checked. Under BOX L the Partner’s Capital Account Analysis, the Ending capital account is positive after Capital contributed during the year, Current year net income (loss), Other increase (decrease) (attach explanation) and Withdrawals and distributions are calculated. Under the Part III BOX 5,8,13,16 and 20 are all with positive numbers, BOX 11 is code C with a negative number, BOX 13 code W, BOX 16 box checked and BOX 20 code A and code B. On the K-3, foreign income and taxes are 0. 

Here are some questions I have:

For Final K-1: 

1. Describe the partnership (check any that apply): do I check the box of This partnership ended in 2022 in addition to This is a publicly traded partnership (PTP)? 
2. Describe the partnership Disposal: do I check the box of Complete disposition? ( I purchased and sold all shares during the year)
3. Tell Us About Your Sale: Do I select Sold Partnership Interest? 
4. Enter Sales Dates: I purchase sold them throughout the year, there are many purchase and sold date, do I enter the first purchase date and the last sold date or do I enter the calendar year (01/01/2022 purchase, 12/31/2022 sold)? 
5. Enter Sale Information: I followed your conversations with tksprabu, search K-1 and do not find any Ordinary Gain reported on K-1 and K-3, I entered 0 as instructed. 
6. Enter Code W Detail: K-1 Line 13 Code is W with 0, I found on K-3 Part X Line 17 Other: Other Portfolio Deduction, do I select Miscellaneous Itemized Deductions and enter $0?
7. Is box 16 checked on your K-1: Box 16 is checked on K-1, I received K-3 but no foreign income and taxes so I select NO.  
8. Describe the Partnership: I check ALL of my investment is this activity is AT RISK. 
9. 2 of the ETF’s total cost basis on K-1 after adding 1f Wash Sale Loss Disallowed does not match the total cost basis on 1099-B, one is $4.79 and the other is $7.99 higher than what is reported on 1099-B, do I add the $12.78 to 1099-B total cost basis when I enter the summary for each sales category (short term box A)? I am sending a copy of 1099-B along with Form 8453 to IRS, will this mismatched information be a problem? 

For the K-1 without final K-1 box checked:

1. Describe the partnership (check any that apply): do I check the box of Disposed of portion of my interest in partnership during 2022 in addition to This is a publicly traded partnership (PTP)? I sold some and kept some positions into 2023, on the K-1 box L the Ending capital account is with a positive number. If I select both, the screen takes me to pt 3, 4 and 5 questions above on Final K-1, do I treat the same as Final K-1 for the sold positions for this ETF?     
2. Do I do the same as pt. 6 above for K-1, select Miscellaneous Itemized Deductions and enter the deduction amount on the K-1?
3. Same as question pt. 7 and 8 above. 

Thank you so much for your help. 

[VMOO]

For 2022 Tax reporting, I’ve received 4 Schedule K-1 and K-3 (3 of them the Final K-1 box are checked) for the ETFs that I traded throughout the year. On 1099-B all 4 ETF are SHORT-TERM TRANSACTIONS FOR WHICH BASIS IS REPORTED TO THE IRS. (Report on Form 8949 Part I, with Box A checked.) Since I am a day trader, there were many transactions on my 1099-B, so I entered a summary for each sales category for all the trades that I made throughout the year.

On Schedule K-1, the 3 ETF with final K-1 box checked, under PART II BOX J Partner’s share of profit, loss, and capital are all 0.000000%. Under BOX L the Partner’s Capital Account Analysis Beginning capital account and Ending capital account are both $ 0, with complete Withdrawals and distributions from the Capital contributed during the year. Under the Part III
BOX 5,8,11,13,16 and 20 are all 0, BOX 11 code C, BOX 13 code W, BOX 16 box checked and BOX 20 code A and code B. On the K-3, the foreign income and taxes are all 0.

On the ETF without final K-1 box checked, under PART II BOX J Partner’s share of profit, loss, and capital the Ending is with a positive %, if decrease is due to sale or exchange of partnership interest BOX is checked. Under BOX L the Partner’s Capital Account Analysis the Ending capital account is positive after Capital contributed during the year, Current year net income (loss), Other increase (decrease) (attach explanation) and Withdrawals and distributions are calculated. Under the Part III BOX 5,8,13,16 and 20 are all with positive numbers, BOX 11 is code C with a negative number, BOX 13 code W, BOX 16 box checked and BOX 20 code A and code B. On the K-3, foreign income and taxes are 0.

Here are some questions I have:
For Final K-1
Describe the partnership (check any that apply): do I check the box of This partnership ended in 2022 in addition to This is a publicly traded partnership (PTP)?
Describe the partnership Disposal: do I check the box of Complete disposition? ( I purchased and sold all shares during the year)
Tell Us About Your Sale: Do I select Sold Partnership Interest?
Enter Sales Dates: I purchase sold them throughout the year, there are many purchase and sold date, do I enter the first purchase date and the last sold date or do I enter the calendar year (01/01/2022 purchase, 12/31/2022 sold)?
Enter Sale Information: I followed your conversations with tksprabu, search K-1 and do not find any Ordinary Gain reported on K-1 and K-3, I entered 0 as instructed.
Enter Code W Detail: K-1 Line 13 Code is W with 0, I found on K-3 Part X Line 17 Other: Other Portfolio Deduction, do I select Miscellaneous Itemized Deductions and enter $0?
Is box 16 checked on your K-1: Box 16 is checked on K-1, I received K-3 but no foreign income and taxes so I select NO.
Describe the Partnership: I check ALL of my investment is this activity is AT RISK.
2 of the ETF’s total cost basis on K-1 after adding 1f Wash Sale Loss Disallowed does not match the total cost basis on 1099-B, one is $4.79 and the other is $7.99 higher than what is reported on 1099-B, do I add the $12.78 to 1099-B total cost basis when I enter a summary for each sales category (short term box A)? I am sending a copy of 1099-B along with Form 8453 to IRS, will the mismatched information be a problem?

For the K-1
Describe the partnership (check any that apply): do I check the box of Disposed of portion of my interest in partnership during 2022 in addition to This is a publicly traded partnership (PTP)? I sold some and kept some positions into 2023, on the K-1 box L the Ending capital account is with a positive number. If I select both, the screen takes me to pt 3, 4 and 5 questions above on Final K-1, do I treat the same as Final K-1 for the sold positions for this ETF?
Do I do the same as pt. 6 above for K-1, select Miscellaneous Itemized Deductions and enter the deduction amount on the K-1?
Same as question pt. 7 and 8 above.

Thank you so much for your help.

[nexchap]

@VMOO 

{edit to add:  you should be aware that IRS Revenue Ruling 84-53 "provides that a partner has a single unified basis in their Partnership interest" (this is usually noted on the K-1}.  That makes day-trading a partnership a nightmare:  your basis on the day you sell is essentially the average cost of all the shares you hold on that day, adjusted for any K-1 related basis changes or distributions.  This means the basis on every sale reported on the 1099-B (as well as wash adjustments) potentially needs to be updated.  This won't have an impact on all the short term sales made on the first 3 K-1s where you started and stopped in the same year, but will impact the one you still held in 2023}

On your questions:

For Final K-1
Describe the partnership (check any that apply): do I check the box of This partnership ended in 2022 in addition to This is a publicly traded partnership (PTP)? YES
Describe the partnership Disposal: do I check the box of Complete disposition? ( I purchased and sold all shares during the year) YES
Tell Us About Your Sale: Do I select Sold Partnership Interest? YES
Enter Sales Dates: I purchase sold them throughout the year, there are many purchase and sold date, do I enter the first purchase date and the last sold date or do I enter the calendar year (01/01/2022 purchase, 12/31/2022 sold)?  It won't matter, since you'll just be putting 0s on the sale screen.  Varfious is also an option
Enter Sale Information: I followed your conversations with tksprabu, search K-1 and do not find any Ordinary Gain reported on K-1 and K-3, I entered 0 as instructed.
Enter Code W Detail: K-1 Line 13 Code is W with 0, I found on K-3 Part X Line 17 Other: Other Portfolio Deduction, do I select Miscellaneous Itemized Deductions and enter $0?  Since its 0, it won't matter if you enter it or not
Is box 16 checked on your K-1: Box 16 is checked on K-1, I received K-3 but no foreign income and taxes so I select NO.
Describe the Partnership: I check ALL of my investment is this activity is AT RISK.
2 of the ETF’s total cost basis on K-1 after adding 1f Wash Sale Loss Disallowed does not match the total cost basis on 1099-B, one is $4.79 and the other is $7.99 higher than what is reported on 1099-B, do I add the $12.78 to 1099-B total cost basis when I enter a summary for each sales category (short term box A)? I am sending a copy of 1099-B along with Form 8453 to IRS, will the mismatched information be a problem?  Given all 0s on the K-1, there shouldn't be a mismatch unless you received distributions and that would lower your cost basis (the K-1 sales schedule basis would be lower than the 1099-B cost basis).  The "correct" basis is {what you actually paid} - {any distributions you received} + or - {any adjustments from the K-1}.  You should figure that out, and then adjust as appropriate.

For the K-1
Describe the partnership (check any that apply): do I check the box of Disposed of portion of my interest in partnership during 2022 in addition to This is a publicly traded partnership (PTP)? I sold some and kept some positions into 2023, on the K-1 box L the Ending capital account is with a positive number.   Yes

If I select both, the screen takes me to pt 3, 4 and 5 questions above on Final K-1, do I treat the same as Final K-1 for the sold positions for this ETF?  As long as their are no Ord Gains, enter all 0 and dates don't matter
In future years, because their are various values on this K-1, your 1099-B and your actual cost basis will not match, so the cost basis on every sale will have to be adjusted, as will the value of wash sales.  There is no TT help in figuring out how to do that.

[Mike9241]

just an FYI. - ordinary income on disposition would not be on the k-3. if there was any it would likely only show up on line 20AB of the K-1 and the supplemental sales schedule you should have received because your tax basis is not what the broker reported on the 1099-B

it's your purchase price + income or - loss that should be the same as section L current year net income/loss

less distributions line 19A + any ordinary income on disposition.  

[VMOO]

just an FYI. - ordinary income on disposition would not be on the k-3. if there was any it would likely only show up on line 20AB of the K-1 and the supplemental sales schedule you should have received because your tax basis is not what the broker reported on the 1099-B it's your purchase price + income or - loss that should be the same as section L current year net income/loss less distributions line 19A + any ordinary income on disposition.  
** Thank you for your help, and pointing out my misunderstanding. The 3 final K-1 20AB are all 0, the one without final K-1 box checked, 20AB came in positive numbers. Under BOX L the Partner’s Capital Account Analysis the Ending capital account is positive after Capital contributed during the year, Current year net income (loss) (I have a loss on this column) , Other increase (decrease) (attach explanation) and Withdrawals and distributions are calculated.

Describe the Partnership: I check ALL of my investment in this activity is AT RISK. Do I need to check I have passive activity losses carried over from last year, or is that for next year filing 2023 taxes? 


[VMOO]

Thank you so much for your help, after going through everything, I have few more questions to ask. 

2 of the ETF’s total cost basis on K-1 after adding 1f Wash Sale Loss Disallowed does not match the total cost basis on 1099-B, one is $4.79 and the other is $7.99 higher than what is reported on 1099-B, do I add the $12.78 to 1099-B total cost basis when I enter a summary for each sales category (short term box A)? I am sending a copy of 1099-B along with Form 8453 to IRS, will the mismatched information be a problem?  Given all 0s on the K-1, there shouldn't be a mismatch unless you received distributions and that would lower your cost basis (the K-1 sales schedule basis would be lower than the 1099-B cost basis). 
** I went over all document and transaction history in my account, I do not find any distributions. I went over each trade from 1099-B of these two ETF with final K-1, sum 1e up minus 1f by day, then I compared the number I have to the number listed on K-1 sale schedule, and except for 4 trades, none of them match. The result I have for these two ETF 1099-B 1e-1f number is lower than K-1, one by only $4.77 (I had a typo yesterday) and the other by only $7.99. Since the K-1 sale schedule came in with an amount without decimals, I am guessing the difference is coming from the wash sale accounting and the decimal rounding up and rounding down. All trades that I made during the year are in the 1099-B including these two ETF, can I reduced the 1f by $12.76 ($4.77+7.99) in the SHORT-TERM TRANSACTIONS FOR WHICH BASIS IS REPORTED TO THE IRS. (Report on Form 8949 Part I, with Box A checked.) summary? Or should I enter separate summaries for these two ETF?

** If based on the comments that you edited at the top, you mentioned:
This means the basis on every sale reported on the 1099-B (as well as wash adjustments) potentially needs to be updated.  This won't have an impact on all the short term sales made on the first 3 K-1s where you started and stopped in the same year, but will impact the one you still held in 2023}
Does this mean that I can report these two ETF based on the information on 1099-B and disregard the discrepancy since I am sending 1099-B along with Form 8949?

It appears that I do not need to send schedule K-1 and K-3, is my understanding correct?

If I select both, the screen takes me to pt 3, 4 and 5 questions above on Final K-1, do I treat the same as Final K-1 for the sold positions for this ETF?  As long as their are no Ord Gains, enter all 0 and dates don't matter
** Enter Code W Detail: K-1 Line 13 Code is W with a positive number, I found on K-3 Part X Line 17 Other: Other Portfolio Deduction, do I select Miscellaneous Itemized Deductions and enter the number on the K-1?

** Ugh… just shoot me, never again.

** Based on what we went through, my schedule K-1 income is $0.00

Thank you so much.