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

[nexchap]

@learner58:  Sorry -- I've never dealt with TT Business, or any Trust taxation issues.

[rolanddawson2500]

For reasons I do not understand, I am getting a different answer by using the TT interview process and the proposal, (as I understand it) of nexchap. My situation, in 2018 we sold 2 MLP's, complete disposal, all held Long term. The 1099B from broker had sales proceeds (correct) and cost basis (incorrect, it was not "adjusted" basis, it was original cost). We corrected the 1099B from broker (Not reported to IRS) to show zero i.e. the column showing gain/loss was 0. Then went through the interview TT interview process. This generated a new 8949. showing a gain on one and a loss on the other MLP. It also showed a positive number on form 4797. If you total them, it comes up with the gross gain/loss, i.e. the gains and losses from the new 8949 plus the gain on the 4797 equal the net gain from Sales Proceeds minus (original cost minus K1 adjusted bais). This is all done with no change from the TT interview process, using the Sales proceeds numbers from the 2 K1's.
I then followed the process outline by nexchap, i.e. adjusted the 1099 B from broker (not reported to IRS to show the gain/loss as adjusted (same numbers as the combined number arrived at in the interview process, i.e. sale proceeds minus (original cost minus K1 adjustments) which gives the same number as the total of the interview process. The sales process in the interview was 0 and used negative numbers on the ordinary gain.
This come up with a $41 higher difference in the total taxes. It is diminimus, (0.3 % of sales proceeds, but I would have expected the same answer, would I not? (Since interview is set up for complete sale of long term assets with no 1099 B from Broker.) Just curious.

[rolanddawson2500]

PS, this is a great thread, nexchap does a very good job of making this very complicated issue somewhat understandable.

[nexchap]

@rolanddawson2500:  First, the interview process works when you do a complete disposition all in one holding period, so those answers should be fine.  But there's also no reason that there should be a difference between methods.  4797 is just the Ord Gain -- no reason that should be different on either process.  The 1099B kicked out by the interview process will calc Cap Gain.  And the 1099B you create should have the exact same number (since you control it).  So figuring out if the $41 is a new TT quirk or an error on your inputting would require nailing down exactly what line item is off by $41.  Could be Sched E, 4797, QBI deduction, or Sched D.  I'm curious if you track it down...

[bobby46]

@nexchap Hello: My first time doing k1. I bought Spectra MLP during 2018 and it was acquired by ENB in 12/2018.  I am trying to do this on turbotax but its quite confusing. Is there a step by step guide on how to enter this information into turbotax. I have downloaded k1 form into turbotax. in turbotax k1 questionnaire. i answered as follows -- this partnership ended in 2018, then complete disposition was checked. then q was what type of disposition was it, i clicked sold partnership interest. The question is about the enter sale information ( regular gain or loss). eg sale price - is that the total amount that was credited to my brokerage account after MLP units were sold? If I enter that amount a lot more tax seems to be required to be paid in federal taxes. Another question in the same . page asks about partnership basis - is that info on k1 form if not how to calculate that? Thanks

[bobby46]

@nexchap Hello: My first time doing k1. I bought Spectra MLP during 2018 and it was acquired by ENB in 12/2018.  I am trying to do this on turbotax but its quite confusing. Is there a step by step guide on how to enter this information into turbotax. I have downloaded k1 form into turbotax. in turbotax k1 questionnaire. i answered as follows -- this partnership ended in 2018, then complete disposition was checked. then q was what type of disposition was it, i clicked sold partnership interest. The question is about the enter sale information ( regular gain or loss). eg sale price - is that the total amount that was credited to my brokerage account after MLP units were sold? If I enter that amount a lot more tax seems to be required to be paid in federal taxes. Another question in the same . page asks about partnership basis - is that info on k1 form if not how to calculate that? Thanks

[nexchap]

If you follow the instructions in the answer at the top of this thread, you'll see that you enter 0 for sales and the inverse of the Ordinary Gain for the basis.  Then you fill out the 1099-B for the sale (which you should have from your broker).  It will show the correct sale price.  But you'll change the basis.  There's more detail on how to calc the basis above, but basically you set it to whatever it needs to be to deliver the correct Cap Gain/Loss.  And you figure out the correct Cap Gain?Loss using the Sales Schedule.

[jjm1]

@nexchap thanks for your response. Out of curiosity, what is the difference between 1) altering the box 7a cost basis on the 1099-B worksheet, 2) leaving 7a alone and entering a 7b corrected basis, or 3) leaving the 1099-B as is and adjusting the basis on the 8949 (box B)?

[nexchap]

From the TT help section:
"Line 7a. Cost or Other Basis (1e)
If "Yes" is marked on line 3, the amount should be that in Box 1e of Form 1099-B or the equivalent statement, if present; usually this is the purchase price plus any purchase expenses plus any selling expenses not included in Form 1099-B, Box 1d.

For sales with "No" marked on line 3, you may use the amount from Box 1e of Form 1099-B, if present, or you may enter a different value for the cost basis if you believe the cost basis provided to you is incorrect.

IRS Publication 550 or Publication 551 may help you determine the proper cost or other basis amount, if necessary.


Line 7b. Corrected Basis (if applicable)

If "Yes" is marked on line 3, but Form 1099-B or the equivalent statement reports an incorrect basis amount in Box 1e, enter the correct basis amount here. (The incorrect amount should appear as the Cost or Other Basis on line 7a.) The program will report this transaction on Form 8949 with adjustment Code B, and include an adjustment equal to the amount on line 7a less the amount on this line."

Not sure about 8949, since everything there would require and override, and I don't trust TT with overrides.

[mmittanck]

In Forms mode, Sch K1, Form 1065, Part II, Disposition, I find this note in the help center.   "Line 5 - Sales price
Enter the selling price of the interest. For abandonments, enter zero. For liquidations, enter the value of the assets received. NOTE: If this is a disposition of a publicly traded partnership (PTP) or a master limited partnership (MLP) that was reported on a Form 1099-B, enter zero for both the sales price and the basis on lines 5 and 7 here and report the sale as normal on Schedule D, checking the appropriate "Reported on 1099-B" Box A or Box B. By reporting the sale of the PTP or MLP on Schedule D and entering zero as the sales price and basis on this K-1 Worksheet, the disposition will get processed correctly throughout the return."
I tried this and all seems to fall into the correct places and work correctly.  I had a complete disposition/sale of a PTP, long term gain.  I checked the 1099B forms/info that was imported from ETrade and the cap gains seems to be calculating correctly.  On the K! interview, Enter Sales Info, I entered zero for Sales Price and Partnership Basis.  I entered the Gain Subject to Recapture as Ordinary Gain/Col 7 from my Sales Schedule into Ordinary Gain in the K1 Enter Sales Info area.  
Is this all correct and will work right?
I'm just confused by one point in the Help Center quote from above, " report the sale as normal on Schedule D, checking the appropriate "Reported on 1099-B" Box A or Box B."   I cannot seem to find a place on Sch D to do this, report as normal and check appropriate box A or B.  

[bobby46]

@nexchap Thanks for your response. Very helpful. Another question. Does Turbotax have the ability to file the K1 for New York state. The Spectra energy MLP k1 form has a State ( eg NY ) portion which needs to be filed to ny, dont know where to file that in turbotax.

[mmittanck]

I am addressing my comment and question above to Nexchap.

[bobby46]

@nexchap addendum to the previous question. My income as shown on the same k1 is a negative number, meaning its a loss for ny state. I am not sure if i need to add that sales schedule information for NY state somewhere and if yes where does that need to be added on turbotax.

[nexchap]

@mmittanck: The problem with the TT "enter 0" stuff is that it doesn't anticipate the entering of Ordinary Gains.  If you enter 0 for sales, 0 for basis, AND $100 for Ord Gain, TT is going to calculate a -$100 Cap Loss in the K-1 interview.  If you go to Forms mode, and look at the K-1 worksheet, you'll see the $100 Ord Gain and the -$100 Cap Loss.  Going further, the -$100 Cap Loss will be transferred to a new 8949 Form (most likely under Code F).  This is not necessarily a problem, as long as you make sure that the combination of this new TT creation plus your 1099-B form add to the right number.  This hassle is why I suggest always setting the basis to the inverse of Ord Gain:  it accomplishes what TT wants (always running the Cap Gain/Loss through the 1099-B), it works no matter what the selling situation is, and it technically matches the TT instructions in the case where there's no Ord Gain.

[nexchap]

@bobby46 :  I'm not familiar with NY State filing requirements.  But if you're required to file, you'd take care of any state related stuff in the TT NY State download.