MLP Sales Help
Edit as I have researched and figured out some stuff.
I have owned MLP for years and researched how to deal with K-1s and still cannot figure it out. I think I really need to find a “TRUE” MLP expert, but I will come back to that in Q3.
Q1) Sold an MLP in 2019 that I bought in 2018.
The MLP distributions are tax free therefore upon sale I have to recapture and pay ordinary income tax on that amount. So the distribution would decrease my basis. But also that Suspended loss would carryovers upon the sale of the MLP.
TT only seems to suspend negative values in Box 1 - 10. For most the other boxes I get an * saying Not provide by program.
I am going to show the MLP numbers for Box 1-10 for 2018 and 2019 with negative numbers that had to be deferred until the sale of the MLP and show Box 19 Distributions.
First Starting Basis when purchased = $6,703 and proceeds upon sale was $6,225
Year Box 1 Box 10 Box 19
2018 -434 -1 491
2019 -202 -405 338
Total $-636 $-406 $829
Using the MLP Sales Schedule
It states in Box 5 my Cumulative Adjustments to Bases is $-1,891 for a Cost Basis of $4,812.
According to the MLP sales Schedule Box 7, my ordinary Gain is $1,656, which I believe in part to the depreciation recapture that must be paid as ordinary gains.
Using that information my Short and Long Term Capital Gain would be:
The Ord Gain = $1,656 - $636 Box (1 Suspended Losses) - $406 (Box 10 Suspended Losses) = $614. That assumes I can apply the suspend Box 10 losses here.
Long Term Capital Gain = -$243
So both my long and short term gain total would be $614 - $243 = $371
Assuming that is correct, why does it differ from my actual gain.
I had an actual loss of $6,225 - $6,703 = -$478 and I receive $829 in Distributions, so I made $351 (total both long and short term gain).
Why is there a $20 difference?? It seems like I should have $20 in suspended losses. I cannot figure out how to account for that difference.
Q2) I would like to understand exactly what is used to increase ones basis and what is used to decrease ones basis. I finally after playing around for hours was able to find numbers to add togeterh to make it match to Part II L. Is there any document anywhere that shows detailed information of which boxes and codes are added to the basis and which ones are reductions to the basis.
Capital Contributed during the year $6,703
Current year increase (decrease) -408
Withdrawal a& Distributions $491
In order to get that -$408 decrease to the basis I had to add Box 1-11 and from that deduct Box 13, Box 16 P (only) and Box 18C.
Q3) I would like to find a “TRUE” MLP K-1 Expert. I can do the easy boxes, but TT does not handle the hard boxes. I want to find someone that understand all the boxes including Box 11I and Box 20 and exactly where everything goes and what is deferred and how to accurately calculate the basis, capital and ordinary gains on a sale.
report what's on the K-1. included with every MLP k-I I have ever seen, when sold, there is a supplemental schedule so you can figure the basis, gain/loss, and any ordinary income to be reported on the sale, your 1099=B will be wrong because it will use your original tax basis not the one that must be used for tax purposes. if you don't have it you either failed to download it or left it in the envelope which you probably no longer have. in most case the entire K-1 package can be downloaded from the MLP website or an alternative they have
if you desire to figure basis out for yourself, that shouldn't be hard in Part II item L reports on the tax basis.
its the beginning value + capital contributions +/- current year income loss +/- other increase decreases and then less distributions shown in part III line 19A if any + any gain subject to recapture as ordinary income as reported on the supplemental schedule. do not use the withdrawal and distribution line on item L that is a plug to zero out your capital a/c. this is your tax basis for the 8949.
now the interesting part must check final k-1 and link to the disposition
in the disposition section complete part II
sales price line 5 - only enter the ordinary income subject to recapture
basis line 7 is $0
ordinary income line 10 is the same as line 5
this will flow to form 4797 line 10
not all MLP's have ordinary income on sale. so 0 would be used for line 5
I edit my Question at the same time you replied. So I will add that part here as it gets me the closest. I will try and do your suggested basis calculation when I get back.
I cannot just use the Sales Schedule as it does not factor in any of the suspended losses. But I did come with another method that might make the most sense.
If I ACCEPT the numbers from the MLP Sales Schedule, but keep the suspended loss separate, then per the MLP Sales Schedule:
The Ord Gain = $1,656 - $636 Box (1 Suspended Losses) - $406 (Box 10 Suspended Losses) = $614. That assumes I can suspend Box 10 losses and apply them here.
Long Term Capital Gain = -$243
This seems most rational, because I had an actual loss of $6,225 - $6,703 - $6,225 = -$478 and I receive $829 Distributions, so I made $351 and then it is just how much is short .vs long term capital gains.
So it at least seems more reasonable, but not sure why it does not match up.
Q1) Does Box 10 losses get suspended and did I apply my suspended losses correctly to calculate the "TRUE" Ordinary Gain and Long Term Gain.
Q2) I am still missing something. As I showed above my actual Gain for this MLP Distribution and All is $351 and the only issue is which part is short term and which part is long term.
Yet doing it this way I show a total of $371 in gains ($614 Ord + - $243 Long Term)
I know only $20 difference, but this was a small and easy sell, so trying to get this calculation down pat.