K-1 Schedule Form 1065 Two Distinct Ownership Periods During 2023

[Fernanag]

Hi.  My situation is with a K-1 for a publicly traded partnership. I started the year with 300 units, and totally disposed of that ownership during the year at a loss.  However late in the year, more than 30 days after the disposition (to avoid wash rule), I bought 500 units and held to year end.  So I have two distinct holding periods.  Ideally I would have a K-1 for 300 units with full disposition for the first holding period and another K-1 for 500 units with new ownership and no disposition at year end.

Unfortunately I only received one K-1 with everything commingled.  I contacted the TaxPackageSupport help line and the representatives claimed that their systems cannot split the commingled K-1 into two distinct period K-1s, plus the typical yadda yadda yadda about professional tax advice etc., which I was not requesting.

Obviously the reason I am motivated to get this done is because I want to rightfully and perfectly legally realize my tax loss in the first holding period, which is not happening with a K-1 for continuous ownership.

My solution would be in TT to do two K-1s for this MLP.  To get the right figures I would use my trading and distribution records, plus allocating the 2023 internal company performance (Boxes 1 through 13 of the commingled K-1), to arrive at the right cost basis for the disposed ownership and right figures to populate each box for each of the two distinct K-1s.

Question:  does TT professional have experience handling a similar issue and what insights and tips can you provide?

Thank you.

[Mike9241]

you shouldn't need to determine proper cost basis. There should have been a supplement schedule with the info need to compute gain/loss on disposal

it might be labeled as 2023 sales worksheet

here are the typical columns on such a worksheet

1. units sold obviously it should be 300

2. sales date

3. sales proceeds - enter from 1099-B

4. average purchase price/ initial tax basis amount - should be a number

5. cumulative adjustments to sale that should only be the profit/loss and distributions attributible to the shares sold

6. average cost basis which should be column 4 less 5

7. gain subject to recapture as ordinary income. this is the only nuber that gets entered in the k-1 ales section as sales price and then as ordinary gain. flows to 4797 line 10. this could be zero or not present. the amount adds to your tax basis for purposes of schedule D/Form 8949, do not use what broker reports as tax basis

 8. percent long term

there may be other columns

you can do a rough check of how accurate in total your profit and loss allocations are for each lot by taking

column 5 and subtracting the distributions received on the 300 share lot. the remainder would be the total of profit or loss for that lot   

another way would to be to use schedule L

for capital contribution use the purchase price of the 500 share lot

subtract the distributions for the 500 share lot

subtract ending capital account  - (this is the tax basis remaining of the 500 share lot)

the result you get should be close to the profit/loss allocated to the 500 share lot 

the results under either method may not agree with your calculations. 

2 k-1's are only necessary if there are business lossses showing on line 1,2 or 3.

losses on these lines attributable to the 500 share lot are not deductible due to the tax laws for PTP

while for the 300 share lot they would be because of complete disposition. if they're profits segregation on two k-1s isn't necessary because all the income is taxable.

[Fernan]

Thanks Mike, awesome reply.

Yes, there is a supplement that has all the information you describe and allows me to back into the basis of the 300 units sold.  Unfortunately, there is also a huge value in the Column 7 recapture box, which is shifting the capital losses on the 300 units sold to ordinary losses, which then are being disallowed.  I would assume (I could be wrong) that the disallowed losses are caused in TT because the software is seeing just a partial disposition, not seeing a total disposition.  Solution:  help the software see there is a total disposition. 

I'm guessing that if I do two K-1s in TT for this PTP, the first K-1 being a total disposition of the 300 units, the full losses will go through.  The second K-1 for the reacquired 500 units were bought in December 2023 with no distributions, and little time for internal income/losses, so the basis should be simple enough to deduce.

The key would be to do the two K-1s, sort of like what TT requires when there are figures in more than one box 1, 2 or 3.

Mike is that the right path forward?  If so, I will do a draft test in my TT 2023 return to see if the 2 K-1s make a difference, and report back. Thanks.

[KristinaK]

It seems like a sensible approach. Make sure that your basis calculations are correct. 

Here is The Tax Advisor article about PTPs that might be a helpful resource.