1099-B and K-1 Form

Forum|Forum|5 years ago
April 10, 2021
2 replies
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I know there have been variations of this situation, but sometimes there are conflicting answers. So here goes. I bought and sold all my USO ETF in 2020 and received both a broker 1099-B and K-1 for the sale. On the 1099-B, the cost was $2400 and sale was $3100, or a net income of $700. On the K-1, the cost was $2400 but the sale was $3220 or a net income of $820. I entered all the K-1 info as prompted by TT. Then as not to duplicate the profit, I read that I would simply increase the cost basis of the 1099-B by $120 (the difference in profit). But in doing that, I still owe more taxes than if I just reported the values of the 1099-B and didn't report the K-1. I know it is best to report both, but do I adjust the 1099-B cost basis until I have the same tax if without a K-1 or am I missing something? Appreciate any help. Thanks in Advance.

nexchap

Level 9

I may be able to help, but first need a little more info. Typically a K-1 won't report the proceeds from a sale: your broker sees that information, but the partnership is only notified that you sold xx units. So where on the K-1 is it telling you that the sale was for $3220? And how much did you actually sell for (according to your own records)?

**Say "Thanks" by clicking the thumb icon in a post. **Note also, I'm not a Tax Preparer/CPA. Just a volunteer, seasoned, TurboTax user. . Use any advice accordingly!

bobp1426Author

Level 2

Under Schedule K-1 "Partner's share of income, Deductions and Credits" item L "Partner's Capital Account Analysis" item "Withdrawals & Distribution" - that is where the value of $3220. I actually sold for $3,100 per the 1099-B Broker and my records. No Dividends or other distribution since only held for a few months.

bobp1426Author

Level 2

@bobp1426

@bobp1426 wrote:

So to make everything balance, I will increase the "Cost Basis" on my 1099-B form (since it's not reported to the IRS) until my tax is the same as it was without the K-1.

Just to clarify, you're not adjusting the basis to get to a total "tax" number. You adjust to make sure the amount of income that's taxed isn't double-counted. The amount of tax you pay on a K-1 investment will be affected by all the different rates the IRS applies to different types of income (int, div, qual div, long vs short term cap gain, etc) as well as any other limitations imposed by your return. There's no reason for the final tax on this buy/sell to match a similar buy/sell in a regular corporation.

Good Morning Nexcap. I'm a little confused by your answer. Here is my analysis. For argument sake, when there was no K-1, my Total Tax on my return for everything with only the $700 gain from the 1099-B was $1,950. When I add the K-1 form, the Total Tax on my return jumps to $2,011. So clearly I'm being taxed twice. This shows up on Schedule D as: Short term gain of $700 (from 1099-B), $328 (from K-1) and Long Term gain of $492 (from K-1). A total taxation of $1,520 ($700 + $820). (The K-1 has both long and short term due to Code C - Contracts and Saddles on the K-1).

I agree, I should only be taxed on the short term gain of the 1099-B of the $700. The easiest way I see to adjust so that my Total Tax due is back to $1,950 is to adjust the cost basis on the 1099-B (since that is not reported to the IRS). I did this adjustment on the form "Capital Gain Adjustment Worksheet". In Part II "Manual Adjustment", I entered Code O and a negative $350. That increased my 1099-B cost basis to $2,750. Now my Total Tax Due is back to $1,950. Basically the Long Term gain from the K-1 was counteracted by the 1099-B gain.

So now both are shown, K-1 and 1099-B (needed since sale amount is reported to IRS) and Total Tax Due is back to the original amount (without the K-1). Does this make sense? Anything else I should Do?

Mike9241

Level 15

USO's legal structure is that of a partnership. that's why you got a k-1. so you need to report the k-1 info on your tax return. in addition, the 1099-B shows only your original tax basis (what you paid to purchase it in the section - cost not reported to IRS section of 1099-B (type B or D depending on holding period) with the K-1 you should have received a sales schedule which will allow you to compute your correct tax basis which then should be substituted for what's on the broker's statement.

the 1099-B shows only your original tax basis - the reason for this is the broker receives no updates as to items affecting tax basis such as the income/loss and distributions all of which affect your tax basis

Haydenbyers

Level 2

Thank you for this answer. I have 7 K-1s and I’m a lot of different transactions related to these publicly traded partnerships on my 1099-B.

Also almost all of these transaction are showing up under the “cost not reported to IRS section of 1099-B type B” section. Any tips on computing the correct tax basis which then should be substituted for what's on the broker's statement? I have a ton of entries. I knew I felt like I was being taxed twice by having it on the k-1s and 1099-B without adjusting the cost basis. Thank you

nexchap

Level 9

@Haydenbyers This thread gets into the detail on how to handle this. Its been running for several years, so there's lots of different examples and clarifications in the comments:

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/how-i-report-the-sale-of-mlp-shares-in-turbo-tax-i-sold-all-shares/00/776624

**Say "Thanks" by clicking the thumb icon in a post. **Note also, I'm not a Tax Preparer/CPA. Just a volunteer, seasoned, TurboTax user. . Use any advice accordingly!