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

[k1_learner19]

@nexchap, I have one more question, under "Enter Sales Information" Section on TurboTax K-1 interview section, there are two columns: one is "Regular Gain or Loss" column and another is "AMT Gain or Loss" column. When I use your method to enter $400 of ordinary gain in "Regular Gain or Loss" column, the same $400 is automatically populated in "AMT Gain or Loss" column by Turbotax, is this right? In another word, should TurboTax automatically populate same amount of ordinary gain in "AMT Gain or Loss" column? If it is not right, how should I fix it?  

[nexchap]

@k1_learner19  A value has to go in both columns.  Some Sales Schedules include an adjustment (e.g. -10) so that the "Regular" column would be $400 and the AMT column would be $390.  If you don't have an adjustment on your K-1 then $400 goes in both columns.

[aws316]

@k1_learner19 if there are no amt adjustments in the far right column of the sales schedule, then the regular gain will equal the AMT gain.

[nexchap]

@spoede1026:  Let's try this:  ignoring terminology, the logic on a Sales Schedule is usually 1) figure out your basis based on all the adjustments the partner has allocated to you 2) figure out your TOTAL profit/loss on the sale (proceeds less basis) 3) split those TOTAL gains into 2 pieces: a) the cap gain/loss that is taxed at one rate and goes to 1099-B --> Form 8949 --> Sched D and b) the Ordinary gain that is taxed at regular tax rates and is reported on Form 4797.  So if you can figure out what 3a is, that is what needs to make it to the 1099-B.  And if you can figure out what 3b is, that's what TT will handle if entered into the Ordinary Gain part of the K-1 interview in the sales discussion.  But if your MLP isn't giving you the data to do that, I'm not sure what else to suggest.

[k1_learner19]

@nexchap, @aws316, Thanks so much for both of your quick response and kindness!!!  So I just leave that $400 of ordinary gain in both columns without any changes since I don't have any AMT column on my Sales Schedule, right? This may be a dummy question, I am relatively new to this crazy K1 things, just want to do it right. Greatly appreciated!!!

[nexchap]

@k1_learner19 Correct.  $400 in both columns

[k1_learner19]

@nexchap, thank you and you made my day! My best wish to you and have a wonderful weekend!!!

[GoodShip]

@nexchap, Thanks for the missing piece of the TT puzzle, using the inverse of Ordinary Gain as cost basis. For partial dispositions, I see using inverse of Ordinary Gain as cost basis allows the full ordinary gain to be completely offset by passive losses(when available) on the 1040. This was not happening when I was using zero as cost basis, it was only partially offsetting Ordinary Gain while calculating some capital (loss) to sch d. . For full dispositions(a complete disposition checked), are you still using inverse as cost basis? thanks.

[nexchap]

@GoodShip:  I do complete and partial dispositions the same way (as posted above).  It always works, and its just easier to learn one routine and stick with it.

[GoodShip]

@GoodShip, Right, but it is very important for tax preparers to realize the difference in checking the box that says "complete disposition". When you check this box, TT releases all suspended passive losses from prior years to be used now, in the current year. If your don't check this box, and do it as a "partial sale of units", then all the carryover passive losses will not be released, and could get wasted or lost. To differentiate in TT between full and partial disposition is extremely important. Am I missing something?

[nexchap]

@GoodShip:  Sorry -- wasn't meaning to imply that I did all the box checking the same way.  Complete dispositions are started with "This partnership ended..." while partial are "Partial...".  The right boxes need to be checked for the taxpayers particular transaction.  But when I get to the financial bit, where Ordinary Gain must be entered and the 1099-B handled, I always do it the same way:  Ordinary Gain handled in the K-1, Cap Gain/Loss handled on the 1099-B (by using the inverse ord gain trick).  TT will then take care of releasing the correct amount of Passive Losses.

[jjm1]

My situation is a total disposition at a capital loss (and sadly with a hefty ordinary gain that is larger than the capital loss).

Is it true that I can enter the $8 brokerage fee associated with the sale of my MLP interest as "selling expenses"? Following the other instructions on this page, this generates a "box C" copy of form 8949 showing a basis and capital loss equal to that expense. Is this what's supposed to happen?

The basis on my 1099-B is slightly more favorable than that reported on the K-1 Sales Schedule. A tax accountant suggested I could use the 1099-B basis instead of K-1. Is this correct/legal? TT seems to have populated 8949 using the unreported 1099-B basis anyway, but to be accurate I think I need to override 8949 to enter the K-1 basis, then enter an adjustment for the 1099-B figure. Does that sound right? Or can I just leave it as is?

[jjm1]

Another question...the instructions on the TT form (K-1 Additional Information for Sale of Partnership Interest) say that if this is a disposition of a PTP or MLP 'that was reported to you on a Form 1099-B, enter a sales price of zero on line 5 and a basis of zero on line 7 below. Enter the 1099-B transaction on Schedule D, checking the appropriate "Reported on 1099-B" box A or B.'

So instead of the inverse of the ordinary gain as you recommend, the current instructions say to enter 0.

This appears to cause the program to count the ordinary gain in the short-term loss on line 10, which flows through to 8949 (C) and Schedule D as a capital loss. Does this mean the program is incorrectly counting a gain as a loss, or is it supposed to be doing that?

[nexchap]

@jjm:  TT's instructions to enter 0 for sales and basis don't always work correctly if you have Ordinary Gain.  That's why I had to put this thread together.  The essence of the post is that the only thing you want flowing through your K-1 worksheet is the Ordinary Gain.  No cap gain/loss.  No selling expenses.  That's what TT was trying to do with the "enter 0" stuff, but they left out anything about how to handle Ord Gain.

The tax accountant who said to use the 1099-B basis doesn't understand MLPs.  Your broker doesn't track all the K-1 adjustments to cost.  Most likely, they just reported what you initially spent on the MLP.  This is absolutely not the correct cost to use.  You need to use the "Sales Schedule" to calculate what your Cap Loss should be, then adjust the 1099-B to get there (by entering the adjusted basis on that form).  And yes, you can also adjust for the $8 broker fee, but do it on the 1099-B.  Note that you don't need to override anything -- you can make the adjustments on the 1099-B and TT will then put that number on 8949.

Finally, also remember that all your passive losses from prior years will be released to partially (or in some cases fully) offset that Ordinary Gain.  So it might not be as sad as you think....

[learner58]

@nexchap  this thread has been extremely helpful... ty for your answers here. Can you tell us how to handle the sale (partial and total) of an mlp that was held in a trust account, using TT Business?