K-1 Sales Information with partial disposition

[MLPK1]

Hello,

I asked a question yesterday about complete disposition of an MLP and @Mike9241 answered that question well for me. I now have a few questions about a partial disposition and would greatly appreciate any advice.

1. Can I handle a partial disposition the same, such as below for ARLP and then correct my cost basis on the 1099B as $20,219 ($16,616+$3603)?

2. Energy Transfer is very complicated, it appears. I ended up doing five K-1's for that alone, based on recommendations here and in TurboTax. One for ET (Bus), one for ET (Real Est), one for Sun (Bus), one for Sun (Real Est) and one for USAC (Bus). My question, is can I do all the sales information for just one of them (ET (Bus))? They don't break it up on the sales schedule. And if I can, why all the other K-1 forms?

3. Lastly, Form 8990. Apparently TurboTax does not handle this. Two of the MLP's have $0 for Box 13 Code K so I assume I do not need them, but ET has $778 for Box 13 Code K. How do I handle this? Is there going to be a problem because of all the K-1 forms associated with ET?

I apologize for all the questions - thank you again.

[Mike9241]

Basically most reporting is the same. The major difference is that on a partial disposition, none of the suspended losses are released.  You also have an issue with anything on 13k.  There is no clear guidance on how to handle it on a partial disposition, and you probably need to file Form 8990

My comments on ET copied from its tax package

 One of the unique tax issues related to investments in PTPs provides that the passive activity loss limitations are generally applied separately with respect to each PTP that is owned by the taxpayer. However, the application of the passive loss limitations to tiered PTPs is not entirely clear, so you should consult your
personal tax advisor as to whether you are subject to the passive loss limitations, and if so, how the information presented below should be reported on your federal and state income tax returns.

In other words, do you report everything on 1 K-1 or 4? You'll see the problem with 4; should one be liquidated or merged into another and upon your total or even partial disposition.

I can tell you from experience (I used 4 K-1s) that, upon your disposal, the sales schedule will not be broken down for each entity. There will be no guidance on what to do if one is merged into another if you do separate K-1s.

[MLPK1]

Thanks for the response and the detailed answers. If I may ask, how did you deal with the multiple K-1s upon disposal? Would it make sense/be doable to put everything into one k-1? The business vs real estate strikes me as the tougher issue to deal with.

[Mike9241 · Accepted solution]

The way I dealt with the 4 K-1s was to enter the disposition recapture on just ET for the other on their K-1s I used zero for sales price and zero for cost.  This was solely to prevent them from being transferred into the following year and to free up their suspended losses.

In my situation I was being conservative because one showed a profit while the others showed losses. So I got taxed on the profit while the losses on the other 3 were suspended.  Since the IRS has not clarified the issue, I can't say using 1 K-1 is right or wrong. If you do, then add the line 2 loss to line 1 because Turbotax does not accept entries on both lines in a single K-1.  

[MLPK1]

Okay, thanks. I see your reasoning and I think it's best to be conservative as well. I always knew K-1s were complicated and just when I figure out  one issue, another issue pops up. I'm pretty confident now about how to deal with most of them. ET is certainly another level of complicated though.

Thanks again - you've been extremely helpful and I appreciate you taking the time to offer advice.