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

[rolanddawson2500]

@nexchap Good question. It was on the TT interview form. "My Sales Worksheet" on my 2 K1's has 11 column's. Up to the 1st 7, seem to be self Explanatory. (Units Sold, Date sold, Sales proceeds, Avg Purchase price, Cumulative Adjustments to Basis, Average Cost Basis , Gain subject to Recapture as Ordinary Income.) Column 8 is headed "Amount Gain/Loss Adjustment" which I took to be the 1250 Gain, 2 partnerships, one is positive and one is a negative number, both very small. Column 9 is % Long Term (100% for us). Column 10 and 11 are headed "Adjusted For Bonus Depreciation" and are for states that do not conform to Federal bonus rules. It appears that Column 8 applies only to Alt Minimum Tax? If so, I will rerun with zero's in both your general method and TT's specific method for 1250  gain and see if i get same answer. These are very confusing to me (and I think a lot of folks), wish TT had put more effort into how to fill these out. (Oklahoma is apparently non conforming, but I did NOT see where TT addressed this in their Oklahoma tax program????)

[martin3]

Thanks nexchap. I think its great you're available to help!  Yes, I did get a 1099 and they had their basis. I did correct that number on the 1099 form to the adjusted basis number which appears on the k-1 sales schedule in box 6.  Yes, it's the result of purchase price (box 4) less the Cum Adj they provided (box 5) so that's all good. However, box 7 has the "gain subject to recapture as ordinary income" (which i did use on entering the k-1) and it has the reference notation "Form 4797 Part II line 10/ Form 8949 Column G." beneath it. That gain amount did carry thru and appear on the 4797 line 10 but not the 8949 column G. It's that notation that makes me wonder if i am supposed to enter in in Column G.  I doesn't appear there now.  And, if i do enter it, what code does it need?  I guess i am wondering if that Column G adjustment is only for correcting a reported basis or if i should do anything with it? thanks again

[nexchap]

@martin:  That's a confusing notation about 8949 Col G.  Its helping notify you that your Cap Gain isn't just [Sales]-[Basis], but [Sales]-[Basis]-[Ord Gain].  But the way they suggest doing it makes assumptions about how you're filling out the 1099 that may not be correct, and about how TT data entry happens.  Just make sure the basis on your 1099-B is giving the correct Cap Gain and you'll have the data entry right.

[nexchap]

@rolanddawson2500: Does Column 8 say "Amount Gain/Loss Adjustment" or "AMT Gain/Loss Adjustment"?  I assume the latter, and yes -- its just for AMT (and if you go to your 6251 line 2K you'll see the adjustments there).  Its nothing to do with 1250.
As for handling the state return, see the dialog with bobby46 above.  I don't think you'll ever find it in the interview, but should be able to find it in Forms.

[martin3]

@ nexchap  And that's part of the problem.  Given these adjustments for Ord Inc etc, i dont know what the gain SHOULD be. In your opinion, is it Sales less  K-1 Basis (which is after "cumulative adjustments") OR Sales less basis less gain? What result do i want?

[nexchap]

@martin :  The Sales Schedule should spell out what the right Cap Gain is if you work across the columns.  But here's an example:  

You bought for $10,000.  You sold for $15,000.  The K-1 says you had "Cum Adjustments" of -$4000.  
So your Total Gain is ($15,000 - ($10,000-$4000)) = $9,000.  

But the IRS taxes that at two different rates.  Part of it is at Cap Gain rates, and part of it is at Ordinary Income rates.  So the Total Gain of $9000 has to be split, which is why the K-1 will tell you that, for example, $3500 is Ordinary Gain.

So now your $9000 Total Gain splits into $3500 Ord Gain and $5500 Cap Gain.  
The $3500 should be on Form 4797
The $5500 is what needs to be on the 1099-B
So what basis goes on the 1099-B?  Well, it shows $15,000 as Sale Proceeds, and you want Cap Gain of $5500, which means your basis is $9,500.  So that's what you enter on the 1099-B.

Note that the $9500 basis can be arrived at differently:
Purchase ($10000) - Adjustments ($4000) + Ordinary Gain ($3500).  But that's not a very intuitive formula.  And its easy to get wrong (as I did when I wrote it a couple comments ago)...

[martin3]

THAT'S WHAT I NEEDED TO HEAR!  And to add to the confusion - i have a loss. But I think i get it. It just means that my capital loss is bigger since I will have that gain elsewhere.  OK . I will go adjust the basis i have on the 1099 input and I'll leave that 8949 column G blank despite the notation on the schedule.  Thanks again!

[jjm1]

@nexchap thanks for spelling out the gain calculation in greater detail, big help. The second method may be less intuitive but it's simpler to follow because it's an easy sum of three boxes on the sales schedule.

In my case the K-1 sales schedule had a blank for the sales proceeds so all I have to go on is the amount on the 1099. For basis, the K-1 did my work for me by including a box 9 "Total Adjusted Basis for Capital Gain/Loss Purposes" which is the sum of the initial basis, adjustments to basis and ordinary gain. So I can put that as the basis on my TurboTax 1099-B.

[bobby46]

@nexchap I entered the data from k1 in the k1 questionnaire in turbotax with inverse of ordinary gain / loss. eg number of 7 in the ordinary gain column was entered as -7.  Is that capable of causing a negative number to appear on 8949 form column e? Its not allowing me to electronically file the taxes. Wants me to file by printing and mailing. Any solutions to this ? Thanks a lot.

[nexchap]

@bobby46: If you followed the instructions, nothing from your K-1 went to 8949.  But I don't understand what you wrote.  If you had Ord Gain of 7, you'd put 7 in for Ord Gain.  You'd put 0 in for Sales.  And you'd put -7 in for Partnership Basis.

[bobby46]

@nexchap
here is the post at the top of this thread.
"Because of all this, I handle all scenarios the same way:
Use the K-1 interview for the 'ordinary gain' portion of the MLP sale, but not the capital gain/loss.  Do this by: 1) enter 0 for sales proceeds, 2) enter the ordinary gain numbers provided on the K-1.  Note that there will be two ordinary gain numbers, one for Regular and one for AMT, and 3) set your basis as the inverse of the ordinary gain (for example, if ordinary gain was 100 (regular) and 90 (AMT), set basis as -100 (regular) and -90 (AMT).  Doing this puts the ordinary gain into all the right spots on your tax return, but sets the capital gain/loss as $0 for both Regular and AMT.
"
On k1 questionnaire on turbo tax. these are the questions at that step where I entered the ordinary gain information .
Regular gain or loss
heading. what I entered.
sales price - 0 ( zero)
selling expense - I did not fill it
partnership basis - 0 ( I entered zero)
Ordinary gain - I entered the inverse of the ordinary gain shown in my k1 sales schedule here. in my sales schedule ordinary gain is + 7, I entered - 7 in the box. This number -7 is showing up in my 8949 form. what could I be doing wrong?
thanks a lot for your help.

[bobby46]

@nexchap "@bobby46: If you followed the instructions, nothing from your K-1 went to 8949.  But I don't understand what you wrote.  If you had Ord Gain of 7, you'd put 7 in for Ord Gain.  You'd put 0 in for Sales.  And you'd put -7 in for Partnership Basis."
I looked at this post again and i saw what i was doing wrong. i was putting zero in the partnership basis box.
Now i entered -7 in partnership basis and +7 in ordinary gain. and this caused both my short term and long term gain to be zero on the next page. this seems to have fixed the problem. On 8949 now the correct cost basis and selling price of the MLP is showing up. this info in 8949 corresponds now to what i calculated in terms of my cost basis and what the selling price was per the 1099 b and brokerage info.  Thanks a million.

[nexchap]

@bobby46  Happy to help.

[rolanddawson2500]

@nexchap Me to, I missed that in your original explanation of the "simplified" (one that handles ST and LT or partial), i.e. needed to put inverse of ordinary gain in partnership basis on K1 interview. This got the tax almost identical to what I filed, and the 4797 dead on. Sure hope TT fixes this for next year, as I have a Enlink MLP that was folded into the company, and this will be a mess also. You have helped a lot of people on this thread.

[Loblolly]

Wow... Thanks for all the informative posts... But I have a nuance... I was told by accountants in turbo tax to input the sales data and purchase data in the K1 and delete the brokerage statements..That was the approach I was taken, then I discovered a partnership whereby I have both long-term and short term gains.  In that cased and I just the data in the k1 for the short term, and  enter the  long terms sales in the schedule D?  There I can report the sales and the adjusted basis... Will this work?