if you sold your interest in a PTP, as part of the k-1 package you should have received a sales schedule where your tax basis is reported. On the sales schedule it might be column 6 if it says something like cost basis to that you add column 7 if it says something like gain subject to ordinary income recapture (would also be in box 20AB on the k-1, if any.
details on reporting the sale of a PTP. Do not report the capital gain portion through the k-1 sales section only the ordinary income portion,if any, gets reported here. The capital gain/loss portion is reported on form 8949/schedule D.
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the following is for reference purposes only. incorrect entries are your responsibility.
MLP and PTP reporting k-1 and 8949/1099-B
Enter the k-1 info
Check the PTP box
If total disposition proceed as follows:
Check final K-1 (s/b marked on actual k-1)
Check sold or otherwise disposed of entire interest
On the k-1 disposition section for sales price use the ordinary income. It would be reported in box 20AB of K-1 and also in a column on the sales schedule. Sometimes you’ll see a column with the “751” or the words “Gain subject to recapture as ordinary income” or similar wording on the sales schedule. No 20AB, no column on the sales schedule indicated as ordinary income, then there is no ordinary income. The following is lines from the k-1 sale schedule
* Sales Price = line 20AB (1065 k1) use 0 if bo 20AB and no ordinary income column on sales schedule
* Selling expenses = 0
* Basis = 0 (zero – nothing else)
* Gain is computed and should be same as the sales price.
* Ordinary gain = enter the same amount as the sales price
* Other lines should be zero
This amount flows to form 4797 line 10 and is taxed as ordinary income. This step is necessary, so any suspended passive losses are now allowed assuming complete disposition.
Many are not understanding the above. The 1099-B reporting is not entered in the above section. Doing so will report the sale twice once here and again if you enter the 1099-B info. The above is only for purposes of entering the ordinary income upon disposition. NOTHING ELSE.
Now for the 8949/1099-B Capital gain/loss reporting
The broker’s form is probably coded as B or E – sales proceeds but not cost basis reported to the IRS. This is because the broker does not track the tax basis. It used what you paid originally which is not correct or it was adjusted due to a merger or acquisition.
The correct tax basis is (note that your sales schedule may have a column that reports the adjusted/average tax/cost basis excluding the ordinary income which must be added):
What’s on the sales schedule as purchase price/initial tax basis (usually column 4). it may differ from what you paid originally because of a merger or acquisition. Some of your original cost is allocated to the new securities received, if any.
Then there is a column on the sales schedule that says cumulative adjustments to basis. If it’s positive add it to the cost shown. If it’s negative subtract the amount.
Finally add the amount of ordinary income reported above, if any.
The result is your corrected cost/tax basis for form 8949 – the capital gain/loss portion
Some other things. Look at line 20AB. That number should be added to the ordinary income above for reporting the 199A (qualified business income from the PTP). You don’t have to enter this but then you lose out on a tax deduction = 20% of this amount.
