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

[Rone3]

couple of remaining items and I think I am done.

1. Inputted Brokerage basis on 1099 B 1(e) and then changed on the less common adjustments section to the correct basis per your methodology.  Capital Gain (Loss) Adjustments Worksheet shows proper Loss resulting from the correct cost basis.  Form 8949 Amount of Adjustment for incorrect basis does not have a number in Col g. , cost basis is correct in Col (e), Col (f) has correct "B" code and col H has correct loss.  Why isn't the Amount of Adjustment not showing up in col (g)?

2.  I have only been working with TT for two years, have prior years (8 years) passive losses that need to be included in PTP worksheets, can't find how to enter.

3.  My form selections does not show Schedule E, only Schedule E p2.  Where can I find Schedule E?

thanks very much.

[nexchap]

@Rone3 On your questions:

1. I'm not sure how you made the adjustment, so hard to answer.  If the 1099-B was code B or E, there's no need for any adjustment code:  you just change the Cost Basis value directly on the 1099-B.  If it was code A or D, then open the 1099-B (in forms mode), click the cost basis of the transaction to be adjusted and a magnifying glass appears next to the field.  Click that and you'll open a Capital Gain Adjustments Worksheet.  Check the first box in Part III (Specific Adjustments), enter the corrected basis, and the code and adjustment should fill in.
2. In the interview a screen shows up asking about passive losses from prior years.  It will grab the info from last year's return, but if that's wrong (e.g., missing a bunch of years) just change the values to reflect your earlier K-1s.
3. Sched E, p2, is the correct form for Partnerships.  Page 1 is for Rentals and Royalties.

[deh2]

 Total Gain = Sale Proceeds - (Purchase Price + Cumulative Adjustment to Basis)
     Capital Gain = Total Gain - Ordinary Gain
     Cost Basis = Sale Proceeds - Capital Gain

Negative numbers confuse me.

Using the above formula, how would these numbers fit these formulas.

Sales proceeds:  $5,606               Purchase price: $9,284 (on 1099-b)   K-1 says $10,105

Cumulative adjustments to basis: -9,376        Gain subject to recapture as ordinary income: $6,052

[nexchap]

@deh2 I'll assume $10,105 is your actual purchase price, but you should verify it in your own records. 

Total Gain = $5,606   -   ($10,105   +   -$9,376)   =   $4,877

Capital Gain = $4,877   -   $6,052   =   -$1,175

Cost Basis for your 1099-B = $5,606   -   -$1,175   =   $6,781

In words, the partnership gave you $9,376 in losses and distributions over the years (nearly what you put into it), so your cost basis dropped dramatically.  That's why you show an overall gain on the sale of $4,877.

The overall gain of $4,877 is split between Ordinary Income of $6,052 and a Capital Gain (Loss) of  -$1,175.

To get the -1,175 to show up on your 1099-B, you'd use a cost basis of $6,781

[Zgolf]

@nexchap any chance you can clarify where the ordinary gains come from.  my K1 was for UGL.  it has no information on ordinary gains on the sales schedule.  shows shares, date, purchase price, adjustment to basis, basis, and percentage long term.  i have both long and short term gains which are also reported on the 1099B.  i called turbo tax live and they told me not to fill out the K1 which just seems wrong.  your method seems to make sense except i am not sure what are the ordinary gains.  thank you so much

[navycrab1]

Your 1099-B should show two transactions: one for short term and the 2nd for long term.

The attached schedule from you MLP will combine the two. With the info from the 1099-B

allocate by percentage of each to the MLP info.

Hmm, this is amazing that I could responde.

I'm not happy with the advice received with the conflict between the 1099-B and the MLP

info because of how TurboTax treats and combines them to produce a doubling of the

actual gains - adjusted by the costs on the MLP attached schedule.

Whew, that's enough.

[Zgolf]

@navycrab1   thanks for your reply.  my K1 shows 4 transactions grouped by sales date.  2 lines have a percentage for long term and 2 lines show 0 percent.  from the 1099-B i should only have one line showing the long term percent since all those shares were sold with the first traunch of sales.  TT Live CPA's aren't even allowed to look at my K1 unless i upgrade to an even higher level of membership (forgot what they call it), but at that point it seems like i ought to just get a local CPA and suck up what they charge.  thanks again

[nexchap]

@Zgolf 

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@Zgolf wrote:

@nexchap any chance you can clarify where the ordinary gains come from.  my K1 was for UGL.  it has no information on ordinary gains on the sales schedule.  shows shares, date, purchase price, adjustment to basis, basis, and percentage long term.  i have both long and short term gains which are also reported on the 1099B.  i called turbo tax live and they told me not to fill out the K1 which just seems wrong.  your method seems to make sense except i am not sure what are the ordinary gains.  thank you so much

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Not every partnership reports Ordinary Income at time of sale.  It yours does, it will be on the Sales Schedule.  If that column is missing, or is 0, you don't need to worry about it.

I have no idea why TT Live told you not to report the K-1, but since you don't have any Ordinary Gains, when the K-1 asks you about the sale you'd just enter 0 for sales and 0 for basis.  Then you'd make cost basis adjustments on the 1099-B.

[Zgolf]

this is very helpful.  i have been stuck on the ordinary gains for a while.  I'm not that smart but even I was able to figure out that TT CPA was not telling me the right thing.  thanks again for donating your time to help the struggling TTK1 folks.

[Zgolf]

@nexchap.  it looks like @Allencar didn't reply to this post but i have something similar.  my K1 shows in the sales schedule for 4/3/20 a purchase of 9206 with cumulative adjustment to basis of -10921 giving a cost basis of -1715.  all short term. the 1099-B shows a sale proceeds of 63.97 and cost basis of 9,205.95 (I think they shut down this fund which is unfortunate as a few more months would have turned this around, but i digress).  Anyway, the adjustment to basis is more than the investment and TT won't take a negative basis in the 1099-B.  Is it really as simple as leaving the 1099-B alone and using the line 7 adjustment suggested by allencar?  would i enter the -10921 there.  I don't know how many other people are out there with this issue so if you aren't able/interested in answering i understand.  thanks for considering

[nexchap]

@Zgolf That approach definitely isn't right.  Your cost is dropping below 0 because the partnership has allocated you more losses than you're able to declare.  You have to 'uncheck' the box about "All of my investment is at-risk" and work through Form 6198.  This will determine what losses you'll actually be able to declare from the partnership (the amount on Sched E).  The allowed losses will be lower than 10,921, and will result in something that will also allow you to set your cost on the 1099-B to 0.

Note that this is a very complicated area in tax prep, and if you have questions about the nuances of basis adjustments and at-risk rules you should probably get help from a tax professional.  All I can guarantee is that tricking TT into accepting a negative cost basis is NOT the right approach.

[Zgolf]

@nexchap you really have been a great help.  I wish there was something i could do in return.  thanks a million

[-tax-prep-2018on]

Nexchap, Thanks for all this helpful info as I struggle to get through TT for sale of PTP, which included sale of both long and short term shares. I'm using the TT Easy Step process. Many of my questions have been answered by comments and your responses. But I still have a few particulars to try to get this right.  Any insight you (or others) can provide would be extremely helpful.

1. The Enter Sales Data screen: no break out of LT and ST possible. Do I just enter date the first shares were bought and then the final sale date?  

2. Sale Information screen:  

        a. Sale price = $0?

        b. Partnership basis =  Box 7 on my K-1 Sales Schedule, called Gain Subject to Recapture As Ordinary Income shows 52.  My K-1 number is positive, so I insert it in this box as -52?

        c. Ordinary Gain: +52? The AMT number on my K-1 is 15; I simply put 15 in the TT box, or do I add 15 to the Ordinary Gain number and put 67 in that box?

       d. 1250 Gain: Nothing reported in Box 9c of the K-1; should I put 0 in this box?

3. Finally, I think I am adjusting the Form 8949 Form cost basis according to this formula— Purchase Cost + **bleep** Adjustments to Basis (which in my case is a neg number) + Ordinary Gains? Since the Schedule D splits out ST and LT, do I use my percentage long term supplied in k-1 to figure the allocation to each tranche?

BTW the Purchase Price/Initial Basis Amount listed on the K-1 sales schedule is about 2K less than the 1e number on the 1099. I'm guessing I should use the K-1 number to make the above calculation. 

Much appreciate you confirming/correcting my assumptions. Thanks, 

[nexchap]

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@-tax-prep-2018on 
1. The Enter Sales Data screen: no break out of LT and ST possible. Do I just enter date the first shares were bought and then the final sale date?  

It won't really matter, since the K-1 doesn't need to calculate holding period.  'Various' is an acceptable answer for multiple purchase/sale dates.

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2. Sale Information screen:  

        a. Sale price = $0?

        b. Partnership basis =  Box 7 on my K-1 Sales Schedule, called Gain Subject to Recapture As Ordinary Income shows 52.  My K-1 number is positive, so I insert it in this box as -52?

        c. Ordinary Gain: +52? The AMT number on my K-1 is 15; I simply put 15 in the TT box, or do I add 15 to the Ordinary Gain number and put 67 in that box?

       d. 1250 Gain: Nothing reported in Box 9c of the K-1; should I put 0 in this box?

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For the AMT number, look closely at the K-1 instructions and see if the 15 is labeled as an "adjustment" or something similar.  Typically it is, and you'd add it to your Ord Gain (so 67).  If unsure, you can check with the K-1 preparer.  Correct on the rest.

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3. Finally, I think I am adjusting the Form 8949 Form cost basis according to this formula— Purchase Cost + **bleep** Adjustments to Basis (which in my case is a neg number) + Ordinary Gains? Since the Schedule D splits out ST and LT, do I use my percentage long term supplied in k-1 to figure the allocation to each tranche?

BTW the Purchase Price/Initial Basis Amount listed on the K-1 sales schedule is about 2K less than the 1e number on the 1099. I'm guessing I should use the K-1 number to make the above calculation. 

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Since the K-1 sales sched splits the adjustments to basis between long and short term, you should be able to use those numbers directly.  The Ord Gain splits propotionally (i.e., look at Ord Gain/Share, and spread based on the shares in each transaction).  On purchase price, its unusual for the K-1 number to be lower than the 1099-B.  The partnership gets the purchase price from your broker, so there shouldn't be a disconnect.  Look at your own records to find out what the right starting number is (its whatever you actually paid).  That's what you should use as the starting point, though if there's a big difference between that and what the partnership is showing it may be worth finding out why.

[-tax-prep-2018on]

Thanks for the speedy turn around, this is really helpful info! My PTP Sales Schedule does not split the adjustments between LT and ST; it just treats the shares as one tranche. However, it does give me a % LT  (i.e. 54% LT). Is it necessary to have the actual adjustment numbers for each tranche (necessitating calling the K-1 provider) or can I use this percentage to allocate Cost Basis between ST & LT on the Form 8949/Schedule D?