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

[Bruce52]

Your biggest concern is suspended losses carried forward.  If Turbotax did your return every year you received a K-1 then Turbotax should have a carryforward which it will apply.  If Turbotax did not do it every year you need to get each return and K-1 and calculate the Carryforward (suspended loss) which will be subtracted from income from the partnership in the year of sale.

On a practical basis if your distributions are less than a couple of a thousand dollars per year precise allocation amounts are not material - Just get the totals correct.  If your distributions are over $10,000 per year your real problem could be that state tax returns could be required.  

[chiefs19]

Hello Nexchap,

I have obviously done something wrong. I thought I entered everything you said correctly in the K-1 interview screen and it now shows Sale of Business Property with an amount that is the same as my Gain Subject to Recapture as Ordinary Income (column 7) on my Sales Schedule. 

Is this how the Enter Sale Information screen should be filled out?

When I go to the next screen, everything on the Review Investment Gain or Loss on Sale shows "zero" for Short-Term gain/loss and Long-Term gain/loss under both Regular Gain/Loss and AMT Gain/Loss.

Right now, TT is showing that I owe a sizable amount in taxes even though I liquidated all my shares in the MLP at a sizeable loss. How can there be a gain in column 7 that is more than the negative cost basis in column 6 and I sold all the shares at a loss?

What exactly do I adjust on the 1099-B? Maybe this could be the issue? All shares were subject to long-term capital gain/loss and all were sold at a loss.

1. Sales Proceeds (column 3) on the Sales Schedule shows (blank), but the Proceeds field on the 1099-B in TT shows an amount. Should this be blank?

2. The Cumulative Adjustments to Basis (column 5) shows a negative amount, but the Adjustment Amt in TT is (blank). Should it be populated with the amount in column 5?

I appreciate all your help!!

[nexchap]

@chiefs19 Easy piece first:  in your entry screen, the AMT column should be 1619 (2000-381) and -1619.  And then what you've done is correct, for that part.  You've told TT that you have 2000 in Ordinary Income to report.  It will flow to Form 4797, part II, line 10 just as the K-1 says it should (you can check this in Forms mode).

I'm going to try to walk through the mechanics below, but the key thing to keep in mind is that your overall MLP transaction gets broken into pieces that show up all over your return.  Over the years, you put cash in and you got cash out (quarterly payments, your final sale).  But you also got all sorts of other tax entries in the K-1 each year that raised and lowered your taxes, and which are all captured by col 5 (adjustments to basis, where your 'basis' is basically what you originally paid for the shares).

So the Ord Income is one part.  Another part is the Capital Gain/Loss.  That's defined as your [sales proceeds] - [your adjusted basis] - [your Ordinary Income].  That number is what needs to show on your 1099-B.  It will not be what your broker reported, because they don't see the K-1.  So some numbers as an example:

Sales Proceeds = 5000

Purchase  = 6500

Cum Adjustments to Basis = -2500

Ordinary Income = 2000

Then the numbers you'd want to see in TT on your 1099-B is 5000 for proceeds, and 5000 - (6500-2500) - 2000 = -1000 as your Capital Gain/Loss.

If you have questions about how to correctly enter this part, I'd suggest posting it as a separate question to the community, because I haven't gone through that part of the interview in detail yet so haven't seen what the latest quirks are yet.  But if you get -1000 as the net result, you've got it.

There's one final piece to all this.  When you went through the interview, you checked off "This Partnership Ended" and "Complete Disposition".  That triggered suspended losses from past years to show up on Sched E.

So your total tax impact for all this is going to be the combination of those 3:  The Ordinary Income, the Cap Gain/Loss, and the Losses on Sched E.  When you compare that number to the cash you put into the investment, less the cash you got back over the years, they should match.

As you have more questions, I'd encourage you to read through the thread again.  Stuff that didn't make sense before may make more sense now that you've been working through it a bit.

[vic201087]

chiefs, you said all your shares were held long-term. this means you don't even need the 1099-b entry. simply use the k-1 interview and make sure to click complete disposition and partnership is over, like nexchap had said. TT will then spit out your cap gains amount. make sure that it's calculating it correctly, and you should be good to go. 

p.s. like nexchap had also mentioned, hopefully you've kept track of all the prior years' losses/gains that you can use to offset some of the ordinary income now. 

[chiefs19]

Hello Nexchap,

Sorry to bother you again. I do not think I completed the "Enter Sale Information" correctly based on my Sale Schedule. I cannot back into your numbers and calculations because of this. 

I posted a Sales Schedule above.

On the "Enter Sale Information" screen, is this how I should enter the data?

Regular Gain or Loss                                            AMT Gain or Loss

1. Sale Price: (leave blank)

2. Selling Expense: (leave blank)

3. Partnership Basis: 2381 [2000 - (-381)]         Partnership Basis: -2381 (reverse of Regular Gain or Loss)

4. Ordinary Gain: 2000                                         Ordinary Gain: -2000 (reverse of Ordinary Gain)

5. 1250 Gain: (leave blank)                                  1250 Gain: (leave blank)

Formula from your response:

Capital Gain/Loss = [sales proceeds] - [your adjusted basis] - [your Ordinary Income]

Formula with my Sales Schedule data:

Capital Gain/Loss = [ 0 ] - [ -1083 ] - [ 2000 ] or -917  (Is this correct)?

From your response: Then the numbers you'd want to see in TT on your 1099-B is 5000 for proceeds, and 5000 - (6500-2500) - 2000 = -1000 as your Capital Gain/Loss.

Formula with my Sales Schedule data:

[ 0 ] - [ 4017 -  (-5101)] - 2000 =  -11,118  (Is this correct???)

Again, I apologize for the continuous barrage of questions and appreciate all the help you provided.  Thank you!!

[nexchap]

@chiefs19 

Sales and Selling Expense are both 0

Ordinary Income is 2000, 1619 for regular, amt

Partnership Basis is -2000, -1619 for regular, amt

That's it for the K-1 portion.  The next screen after those entries will show 0 cap gain/loss, and 4797 will show the 2000.

But for the 1099-B, you got something for the sale, right?  Its 0 on the Sales Schedule because the K-1 preparer doesn't know what you sold for.  So you get that info from your broker, and use it to figure out your Cap Gain/Loss.  So if that was 5000, your total profit on the sale would be 5000 - -1083 = 6083.  But 2000 of that is Ord Income, so the remaining 4083 would be your Cap Gain on the 1099-B.

Note there's one other problem now that you've shown the Sales Schedule:  your cost basis (col 6) can't go below 0.  In the year that it would have hit 0 you were supposed to start filling out the K-1 differently (paying taxes on the distributions, changing the amounts of losses that were suspended).  That requires amending past returns, and using your own records rather than the Sales Schedule.  Its a complicated area, and I'm not able to walk you through the details.  I'd suggest either getting help from a CPA/professional tax preparer, or posting a separate question about this subject and seeing if one of the other TT Experts can walk you threw what you should have done.  Sorry I can't help more on that.

[Taxes_are_hard]

Hello all -

Anyone own EVA (enviva partners) or experience a situation like the one below? On the 2021 K-1 they state:

Effective December 29, 2021, Enviva Partners LP’s federal income status changed from a pass-through partnership to a taxable entity via a “check-the-box” election. Thus the enclosed final Schedule K-1 is for the period beginning January 1, 2021, through the period ending December 28, 2021, the day before the effective date of the tax election. On December 31, 2021, the Partnership completed its conversion from a Delaware limited partnership named Enviva Partners LP to a Delaware corporation named Enviva Inc. The holders will receive a Form 1099-DIV for any distributions beginning December 29, 2021, through the period ending December 31, 2021.

I did not sell any units in 2021 and my question is should I check the box that says "the partnership has ended" in Turbo Tax? I originally did but reviewing everything again, I don't think I should have as I didn't sell anything and it sounds like my units in the PTP will just move to units/shares in a regular corporation for 2022. Then any DIV or capital gains from sales I do in 2022 will be handled on next years return. 

My k-1 shows that my units were exchanged (screenshot below) and then show end of year units at 0. Any thoughts?  Thank you

[nexchap]

@Taxes_are_hard You'd treat this as a complete disposition.  From a tax standpoint, you were a partner and then the partnership ended.  So you have to finalize your tax bill for your time in the partnership.  You do this by treating the conversion as though you sold all the units, and then reinvested that money in this new entity.  So you'd check the "partnership has ended" box, and then "complete disposition" (which will release any suspended losses).  Somewhere in the info from EVA their ought to be a statement about what your opening cost basis is in the new Corp.  That would also be the "price" you got for selling the partnership units.

[PAGB]

Thanks to everyone for this thread and specially @nexchap

I'd like to make sure I'm doing everything correctly so appreciate any help.Some background.

For the Stocks section of our taxes we do a Summary for Each Category (we do not import). We use another software (due to large number of transactions and to correctly calculate wash sales) to generate our 8949 and then attach the pdf file to our return.

We received a K-1 because we bought ETF (exchange traded funds) shares  (PTP) on the stock market, we actually didn't know it was a Partnership. All shares were bought and sold last year so the Year End Shares are 0.

This is a Final K-1

Box 11 (code C) is a negative number. All other box are either empty or zero(boxes 5, 8, 20 and13)

And I have no Ordinary Income anywhere on the Schedule.

Since the sales are already being included in the 8949 and Summary,  this is what I've done so far in the interview for K1:

Describe the Partnership ( I've checked) : This is a Publicly Traded company and This Partnership Ended in 2021

Describe Partnership Disposal (I've Checked): No Entry

The reason I've chosen No Entry is that if I've been told if I check Complete Disposition then TT will ask me for sales info and since the info is already included in my Summary For Each Category and the details are on my 8949  the Complete Disposition option would create duplicate problems (like another 8949). I'm aware that I have to adjust the cost basis for the 8949.

The next screens in the interview asks me about how much of the investment is At Risk. Since everything

has been sold it's 0.

So finally I end up at a Screen that says Deductible Loss may be zero  (I don't why not 'definitely' and just maybe) and I have a non-deductible loss (=the amount in box 11) that will carry over for next year.

So basically what I think I'm doing is that the details of the sales have been reported on 8949, the cost basis has been adjusted so that the loss will not be included this year and the K-1 shows that there is a loss that will be carried over to next year.

Is this all and good with the IRS?

[nexchap]

@PAGB I don't think this is quite right.  I assume you got a sales schedule with the K-1, and it had an "Adjustments to Basis" entry that matched 11c?  And you applied that to your cost basis in your 8949?  If so, you need to make a couple changes in what you entered:

• Check complete disposition.  TT will ask you about sale info, but just enter 0s so it doesn't calculate any gain/loss.  But this will trigger TT to release the 11c value to this year's return (which is what happens when you sell).  And this will also offset the change you made to your cost basis
• Check "All at risk", since it was when you held the investment.  This will keep TT from declaring the 11c value as non-deductible.

That should do it.

[rhugg3]

Great workaround nexchap.  This year, however I am getting a response from Turbotax (in the final review) that I can not e-file because I have a negative cost on form 8949.  This is because of the negative entry for the ordinary gain and amt ordinary gain. 

Any ideas?

[PAGB]

@nexchap 

Thank you for your response

"I assume you got a sales schedule with the K-1, and it had an "Adjustments to Basis" entry that matched 11c?"

Yes

And you applied that to your cost basis in your 8949? Yes that is the plan

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"Check complete disposition. TT will ask you about sale info"

The next screen asks for Sales dates:

Enter Sales Dates: Since these are stocks there are multiple buy and sells with different dates

Purchase Date: I've entered the Date of the First Purchase
Sell Date : I've entered the Date of the Last Sale

I'm not sure if this is permissible or correct ? But I don't know what else to do?

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"Check "All at risk", since it was when you held the investment. This will keep TT from declaring the 11c value as non-deductible."

When I did it before TT  showed me a screen which said  "....Your at-risk amount is generally the money you'd lose (or the debt you'd be liable for) if this partnership stopped operations tomorrow."

Doesn't this imply that none of my investment is at risk?

[nexchap]

@PAGB On purchase date, 'Various' is fine.  TT only needs this if it were calculating short term vs long term, and it's not doing that.  On at-risk, this is really aimed at basis calculations, and suspended losses, when you still are in the partnership.  Keeping it checked ("All of your investment is at risk") does that. 

[nexchap]

@rhugg3 The workaround is aimed at preventing anything you do on the K-1 from ever getting to 8949.  All that ought to be happening is your Org Income gets to form 4797, and your suspended losses go to Sched E.  If you have a negative basis on 8949, it must be coming from something else.  When you corrected your cost basis on the 1099-B, did it go negative?  That's not allowed (and means you're into territory where you don't have any capital at risk).

[PAGB]

@nexchap 

Purchase Date: Various.

My sales schedule has sale dates but they are Various too,

So Sell Date: Various      is also correct?

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"On at-risk, this is really aimed at basis calculations, and suspended losses, when you still are in the partnership. Keeping it checked ("All of your investment is at risk") does that."

Just to be clear The Partnership Ended in 2021. Actually it started and ended in 2021. So is "All of your investment at risk" still the correct option?