How I report the sale of MLP shares in Turbo Tax. I sold all shares.

[Totallyi]

I have included the pictures screenshots but they were not included for some odd reason.

After I doo all the aforementioned steps, I understand I have to go back to 1099-B and adjust  the basis. Am I understanding it correctly?

[nexchap]

@Totallyi On 2020, I'd go back into your return, tell TT you're amending, and enter the K-1.  See if it changes your taxes.  If it does, you can refile.  If not, you won't need to.  But either way, entering the K-1 into the 2020 software will tell you what the carry-overs are, and you'll get to use those carry-overs when you sell.

As to the partial sale in 2020, I don't want to make assumptions about what the different boxes on the Sales Schedule are (sales schedules aren't all standardized), but to generalize:

• You'll need to enter the K-1 into TT.  It'll handle the entries you mention on box 11 and box 13.  Combined with the entries from 2020, TT will record the income and losses in the right places.
• On the USO Sales Schedule is there anything about Ordinary Income?  If not, you'd enter 0 for everything on the sales screen.  If so, you have to do the bit about entering the Ord Income on the sales screen, and also entering its inverse on the Partnership Basis.
• Either way, you then go back to the 1099-B and change the cost that's reported there.  The Sales Schedule should give you a "Adjustment to Basis" number.  You add it to what you paid.
• On the Describe the Partnership screen, you'd check the "PTP" box, and the "partial disposition" box.

[Totallyi]

Thanks so much Nexchap!

On K1  there is nothing about ordinary income at all. I have entered all the 0's and adjusted the basis on 1099-B. Now on a Summary Screen of TT it shows  $X on Stocks, Mutual Funds, Bonds, etc. subsection of the Investment Income section and $Y (which is the same number from box 11) on Contracts and Straddles subsection of the Investment Income section.

Also, since I have box 13 populated, TT asks me what is "code W" is for....K-1 does not specify...

[nexchap]

@Totallyi 13W is for "other deductions".  The K-1 fine print may explain it.  Or you can contact the K-1 preparer to get an explanation.  And if no one knows, you have to do your best to figure out where it belongs.  BUT, it's a deduction, which means it lowers your taxes so its up to you to decide if you want to chase it.  Since its only $6, you might decide to not bother.....

[Totallyi]

Thank you again!

[naviator2003]

@nexchap Thank you so much for the help!!!

[stella4am]

@nexchap I am having a similar issue as @wingman211 where I don’t see an “ordinary gain” column on the sales schedule (pic attached). However, box 20 A = 0 and B = 7. Could you please help clarify how I should adjust the cost basis on the 1099-B in this particular case? Is it 1,713 instead of 3,527?  And to confirm, I should leave the Sales interview screen blank? Thank you!

[nexchap]

@stella4am Yes:  1,713 is your cost basis.  And the K-1 Sales screens can be left blank (although I think TT requires 0 for sales and basis instead of a blank).

[stella4am]

@nexchap Many thanks! A follow-up question…In part 3 of the final K-1, it has the following boxes populated (everything else is blank):
Box 5: 0

Box 8: -67

Box 11: C -1740

Box 13: W* 7

Box 16: (box is checked however the cover letter sent with the form states “Schedule K-3 is not included in the enclosed tax package” so not sure why it is checked)

Box 20: A = 0, B =7

I’m entering these into TT per the interview questions.  Is there anything else I need to do to the 1099-B entry besides adjusting the cost basis from 3,527 to 1,713? 

Thanks again for all your help! 

[nexchap]

@stella4am That's it, except:

- Box 13W asks for additional info.  If none of the boxes TT provides applies, and you use "I have a different description" it will let you enter the data, but it doesn't actually put it anywhere.  You still have to figure out where, or if, to deduct it.  For $7, it may not be worth messing with, but just thought I'd mention it.  And if it's "trader expenses", which has popped up on a bunch of other posts, I don't know where that goes.  You could ask separately on the main forum to get a better answer.

- The K-3 won't come out until much later in the year, and probably won't affect you.  Guidance is to uncheck the box so TT will let you file.  Then, when the K-3 comes out, amend your return if it has any affect.

[lisab5]

 @nexchap 

I've been trying to follow all of your conversations to survive this K-1 business.  Thank you for providing guidance.  I'm looking to adjust my 1099-B, as you stated it is easier to consistently offset everything there.... but my total loss is fairly large on the issued 1099-B, and my K-1 values are negatives for the cumulative adjustments to basis and cost basis.   Will following the process you suggest still work and balance out that I already had a big loss.

K-1 has Purchase price as 1829

Cumulative Adjustment -3032

Cost -1203

Gain sub to recapture 3915

AMT -65

If the 1099-B reports total gain/loss as negative.... do I want to get rid of that ?  I guess I have been reading in the thread about making everything balance out Zero since the K-1 and 1099-B are double reporting, but what to do when the 1099-B has negative.  

I'm just about to pull out my hair, and I appreciate any suggestions.  

Thank you!

   -

[nexchap]

@lisab5 Remember that the cost you use on the 1099-B is [purchase price]+[cumulative adj]+[Ord Income].  So in your case, it would be 1829 + -3032 + 3915 = $2,712  You'd use that in the 1099-B, and your Cap Gain / Loss will calculate correctly.

Its the K-1 where you want to make sure no Cap Gain / Loss is calculated.  So on that screen, you'd use 0 for the selling price, -3915 as the Basis, and 3915 in the Ordinary Income box.  That will handle the reporting of the 3915, but won't compute a Cap Gain on that screen.

[chenxud]

Please help me to understand this:

Purchased ET: 22000 units around August 2020 for $142,492, 13000 units at 3/18/2020 for $53,096.  

Sold All on 4/5/2021 and 4/8/2021

22000 units for $169,487

13000 units for $99,806

Bought 6960 units from July to Dec. of 2021 for$63,548

First question, is this partial sale or full sale?

My K1  sales work sheet has: 

Units sold 35000 unit, purchase price 195,295

Cumulative adjustment -14,612

Average cost basis 180,683

Gain subject to recapture 68,638

AMT adjustment 135

Percentage long term 37%

Adjusted for bonus depreciation cumulative adjustment to basis 13,480

Gain subjected to recapture 44,691

Question 2: why is recapture this high? Is this correct?

How should I report using TT?

[nexchap]

@chenxud It was a full disposition on 4/8/21, but you'll need the K-1 preparer to split the K-1.  You'll want one for 1/1/21 to 4/8/21, when you did a full disposition.  You'll enter all the info into TT and report the sale.  This will allow all the suspended losses to be released.

Then you'll have a 2nd K-1, for July to Dec, which you'll also enter into TT.  To keep track of which is which, you can call the first K-1 'oldET' and the second one 'newET'. 

As to why the recapture is so high, look at the losses being reported in box 1 of the K-1.  In reality, these MLPs typically make a profit.  But they never report one, because they also report massive amounts of depreciation (which reduces profit).  That depreciation is what comes back as 'recapture'. 

As an example (and these numbers are all made up), supposed ET had a pipeline and you're share was worth $100,000.  Over 3 years they depreciate it to $0.  That's $100,000 of losses they report to you, which are suspended until you sell.  So you sell, but ET at that point has to say "You know that pipeline?  It's not really worth $0.  In fact, its pretty much worth $100,000".  Now, if that was the end of the story, you'd get a $100,000 loss on Sched E (taxed at Ordinary rates) and pay an extra $100,000 in Cap Gain (taxed at preferential rates), and the IRS would be unhappy.  So they require that the $100,000 show up as 'recapture', taxed at ordinary rates.  So yes, it is a big number, but you have to compare it to the losses they've reported, which are usually just about as big.

[chenxud]

Strangely, box 1 has 14755 there a positive number.