How do i report PTP sale? Received 1099B reporting capital loss and K-1 showing Cumulative adjustments to basis.

[HH_22]

I am trying to figure out how to report this sale. Bought and sold PTP in 2020. 1099B reports capital loss (Box B). K-1 form 1065 reports a lower cost basis due to Cumulative Adjustment to Basis, which would lead to short capital gain when compared to sales proceeds. K-1 sale schedule shows no ordinary gain/loss column, just initial basis, adjustment to basis and cost basis.  As stated, i fully disposed of this PTP. 

[nexchap]

I just responded to your question on the PTP sale thread, and then saw this, so this same answer is there.

Not all PTPs report Ordinary Gain, so if its not on the Sales Schedule you don't have to deal with it. 

• Enter your K-1, following the interview.  This will let TT handle the K-1 entries and any losses received from the partnership.  On the sale part of the K-1 interview, since you don't have any Ordinary Gains, you'd just enter 0 for proceeds and 0 for basis.
• Your 1099-B was likely code B or E (cost not reported to the IRS), so you're free to change it to whatever is necessary without needing to explain the change to the IRS.  Change the cost so that the correct Capital Gain/Loss is reported to the IRS.

[buzhidaoist]

What if the 1099-B code was A?

[nexchap]

@buzhidaoist Then TT allows you to enter an adjustment code and change the basis.  The only difference is that both the old and new basis are shown.

There's undoubtedly a way to do it in the interview process, but in Forms mode, go to the 1099-B with the incorrect transaction.  Double-click on the 'Description' (or click on any of the magnifying glass icons that show up when you click on any field) and a "Capital Gain (Loss) Adjustments Worksheet" opens up.  In part III, Specific Adjustments, check the first box (1099-B reports and incorrect basis) and enter the right number.

[buzhidaoist]

Thank you!  Now, my sales schedules shows two sale dates (corresponding to the two sales in my 1099B), and it looks like the adjustments to basis are split up across the sales such that one of the cost bases drops into the negative.   I know from another post you mentioned this corresponds to more complex cases, but my situation is simple i.e. bought and completely sold the PTP within the same year.  Now out of these sales, the one that ends up with a negative adjusted basis is reported "box C" on the 1099-B, while the other is "box A". 

Since it won't let me correct the basis to be a negative number, I'm thinking one way would be to "zero out" the 1099-B records (by making basis = proceeds) and then entering in the actual proceeds and adjusted basis for the two sales total in the K1 section.  This is definitely less ideal though, and I was wondering if you would recommend some other way?

The problematic sale is a very low amount, initial basis $35, adjustments to basis $38, so cost basis -$3.  The corresponding proceeds is $14.  Since this is "box C" and therefore not reported to the IRS, could I hack it by just bumping up all the numbers by 3?  I.e. proceeds $17, cost basis $0?  Or is that too shifty, no pun intended

Thanks again @nexchap !

[nexchap]

@buzhidaoist If the dollars involved were significant, I'd be suggesting a CPA.  There's just too many questions that would need to be answered to find the "right" answer.  But for the numbers involved, rounding up to $17 proceeds and 0 basis seems like the best bet.

Alternatively, if the holding periods for the two sales are the same (e.g., both short term), you could just move $3 of basis from the "good" one to the "negative" one.

Note:  this is in no way tax advice, legal advice, or advice in general.  Its just me musing about the simplest way to solve a messy tax situation, where the net tax impact might be around $1.

[buzhidaoist]

@nexchap It is clear exposition of thought that nudges me out of indecision, at the least, and that's enough to warrant my deepest gratitude ❤️