K1 Sale. A question about the Gain recapture as income

[rgbsand]

Sold ET last year.  After an exhausting search I set the 1099B sell to a zero gain to eliminate the duplication of the sale.  This was a long term sale with no basis provided to IRS.

I filled out the sales questions from the sales worksheet to:   sale proceeds of 8414.  Partner basis (box 6) to  2141.  And ordinary gain (box 7) to 8526.  (Note avg purchase price 10344 box 4.  Box 5 was -8203.  )

This results in a loss for the sale of the stock of -2252.  And a huge income gain of 8526.

Question

1.  I assume that the income gain of 8526 is the portion of the gain from the stock sale that is income.  Well I have a loss on the sale and no gain.  So is my logic faulty or I am getting hit with a income gain of 8526 with a loss on the sale of the stock? The 8526 is showing up on form 4797 line 10.  

I will NEVER buy a K1 reporting stock again.

[Mike9241]

You can not report the 1099-B sale through the K-1 worksheet, only the ordinary income recapture. Using the K-1 for the entire sale will result in it being coded either type C or F on the 8949. SALES PROCEEDS NOT REPORTED TO IRS. They got the 1099-B but the type was B or E, meaning the sales proceeds were reported to the IRS. When the iRS computers go to match the sales proceeds reported by the broker and the sales proceeds reported by you, it will likely come up with a mismatch because of the different types. Any refund will likely be delayed until the IRS sends you a notice about the mismatch and you respond. This can delay a refund 4 to 6 months because the response will be handled by a human. Turbotax even warns you not to report the 1099-B sales portion on the k-1

when you sell a ptp there are usually 2 types of gain/loss 1) section 751 ordinary which flows to form 4797 and then to schedule 1 and 2) a capital gain/loss to schedule D

to recap for you, sales price 8414 with an adjusted basis of 2141 meaning you had an overall gain of 5273

it's just that the overall gain is two pieces an ordinary gain of 8526, resulting in a capital loss of 2253

note that the 8526 should be added to current year qbi. also any suspended losses should be released. 

you have found 1 of the dangers of investing in a PTP. the ordinary income recapture turns some of the gain into a capital loss.  The longer you hold it the more the ordinary income recapture builds. 

[rgbsand]

Thanks for the reply.

Reading 1065 Part II form closely explained your comment about how to report the sale or not report if on a 1099B.  

I used the new basis to show a loss on the sale via the 1099B.  I left the Recaputure as ordinary income in the K1 sales question and it published as a loss in the forms.  So now I have a carry over for next year in my case.

I think I have this correct now.  

What is qbi in your reply?