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

[nexchap]

@wingman211 When you sell a partnership, TT allows you to enter the sale info in two possible places.  If not done carefully, double counting or other problems can occur.  That's why this thread advises keeping all Cap Gain related entries ONLY in the 1099-B section of the interview.  Since you don't have any Ord Income, you'd simply enter 0 for everything on the K-1 sales screen.

In the 1099-B section, you'll have all the info needed to report the sale, except that your cost basis has to be adjusted for that -37 reported on the K-1.  So if you bought for $100, your cost on the 1099-B would be $63.

[Snobigdeal]

Thank you in advance for your assistance. I have definitely done something wrong!

 I used the TT INTERVIEW questions for ordinary gain and enter the “GAIN SUBJECT TO RECAPTURE AS ORDINARY INCOME” as the inverse ( negative amount) for regular and AMT gain.

I entered “0” for Sale Price, Selling Expense, Partnership Basis and 1250 Gain.

How do I use the K1 worksheet to determine the gain/loss?  The broker 1099 shows cost of $24k and proceeds of $7k.

the K 1 shows an average cost basis  of -1450 in  box 6 and -$26.5k in  box 5.

I had adjusted the 1099 from broker to show proceeds and cost as same amount.

After all this I get a TT comment after REVIEW stating I cannot E file because I have a “negative cost or other basis “.

any help greatly appreciated!

[wingman211]

Thank you for your response once again @nexchap grandly appreciated.

I noticed that in my K-1, I also have a Passive Foreign Investment Company (PFIC) Annual Statement. Is that any of use for when entering my K-1 information? Same with the form 926 that is also attached?

Bottomline, is entering values from the schedule K-1 (for 1065) the only ones I need for my taxes?

Thank you once again for your time

[nexchap]

@wingman211 I'm not familiar with those forms.  I'd suggest posting a separate question about them.

[nexchap]

@Snobigdeal Using some actual numbers, if your Ordinary Income is $2000, and you have an AMT adjustment of -50, you'd enter $2000 and $1950 for Ordinary Income.  You'd enter 0 for Sale Price and Selling Expense.  You'd enter -2000 and -1950 for Partnership Basis.  When you get to the next screen in the interview, you'd see 0 for Cap Gain.  And if you look at form 4797, you'd see the $2000 that's supposed to be there.  That's it for the K-1.

For the 1099-B, you have to adjust your cost.  Since Sales Schedules aren't standardized, I'm not sure what box 5 and 6 are, but you bought for $24k.  The Sales Schedule should show a Cumulative Adjustments entry.  Let's say that's -$5000.  Then your cost basis is now $19000.  BUT, you have to adjust for the $2000 Ord Income, so you'd add that to the $19000 and use $21000 as your cost basis.

[Snobigdeal]

Thanks,

the entries seemed to pass muster with the TT review.

I will check the forms to make sure it looks good.

thanks again for your insights!

[wingman211]

Hi @nexchap , in the folllowing:

In the 1099-B section, you'll have all the info needed to report the sale, except that your cost basis has to be adjusted for that -37 reported on the K-1.  So if you bought for $100, your cost on the 1099-B would be $63

If I have multiple (4) transactions on my 1099-B, can I simply update the cost basis of one so that the total is -37 the one originally from the 1099-B (and the true one from my initial investment)?

Thank you

[nexchap]

@wingman211 You could do it that way as long as you pay attention to short term vs long term (you couldn't apply the full adjustment to the long term shares, for example).  Sometimes the K-1 provides info on how to split it.  If it doesn't, you can also just spread the adjustment on a 'per share' basis:  if the $37 was for 100 shares total, then you'd adjust each sale at $.37/share in that lot.

[naviator2003]

@nexchap Apologies in advance for long question, but you appear to be the go-to person for this. As such, would LOVE some hand-walking for my situation.

I bought and sold shares in an MLP in the same year (2021). The short-term gains were reported on 1099-B, with Box B checked; TT is reporting the sales as Box B checked.

Question 1. Do I need to adjust the cost basis of the shares reported in the 1099-B?

I read your first few posts about how to log items in the Schedule K-1 interview, but am still perplexed. Here are my numbers from the Sales Schedule:

Purchase Price: 3,839

Cumulative Adjustments to Bases: -314

Cost Basis: 3,525

Gain Subject to Recapture as Ordinary Income: 255

AMT Gain/Loss Adjustment: 0

Question 2. What values do I enter for the Sale Information part of the interview?

Regular Gain or Loss

- Sale Price: ?

- Selling Expense: $0 (there was none)

- Partnership Basis: ?

- Ordinary Gain: ?

- 1250 Gain: $0 (there was none)

AMT Gain or Loss (I'm not in AMT territory)

- Partnership Basis: ?

- Ordinary Gain: ?

- 1250 Gain: $0 (there was none)

Box 20Z lists "Section 199A Publicly Traded Partnership (PTP) Income" as -103. When TT asks "We need some information about your 199A income", do I put the -103 under "(MLP) has business income (loss) / Ordinary  business income (loss)"? What's confusing me is the following description listed for the column for "Gain Subject to Recapture as Ordinary Income (listed above as 255)":

"The instructions to Form 8949 are unclear in the determination of capital gains where total gain on the sale of units is partially ordinary gain. Reporting this amount as a negative adjustment in Column G of Form 8949  should generally result in the correct capital gain or loss. The amount reported as ordinary gain is qualified PTP income for Section 199A and has not been included in the amount reported on Schedule K-1, Line 20Z."

"Form 4797 Form 8949" are listed under this column.

Question 3. Do I add the 255 to the "Ordinary business income (loss)", or does it go somewhere else, or none of the above?

Thanks, in advance!

[luckydogz]

I sold mlp stock in 2021 from mlps I bought in 2020 so all short term. I entered the sales schedule into K1 and zeroed out any gain from 1099 since the K1 would create entries for both ordinary income and capital gains.

Running turbotax, it shows I have a loss from 2020 carried forward. With the method above, do i need to override the 2020 loss to zero?

I ask cuz i noticed that the 2020 loss offset most of the ordinary income from the sales schedule and I read that prior losses can offset gains from the mlp but i was surprised it could offset the ordinary income portion.

would appreciate any comments from others and @nexchap 

[nexchap]

@luckydogz The Sched E losses partially (or fully) offsetting the Ordinary Income is normal.  That's how it should work.  The reason can be a bit complicated (for MLPs, its primarily the accounting for depreciation), but consider a simple example:

Pretend partnerships have just been invented in the tax code.

• A smart accountant puts $10,000 into the partnership.
• They create $10,000 in losses (line 1 on the K-1), through accounting gimmicks, bringing basis to 0.
• They sell the partnership for $10,000.

Obviously, this should not affect their taxes.  $10,0000 in.  $10,000 out.  EXCEPT, In this case, they have $10,000 in losses that pop up on Sched E and offset normal, W-2 like, income that's taxed at normal tax rates.  And they have a $10,000 Cap Gain (because their basis was reduced to 0) on Sched D, which is taxed at a reduced rate.  So they actually reduced their overall tax bill with this "partnership". 

So the IRS got smart, and said that the gain on sale would have to be looked at to see how much of it would actually be Cap Gain, and how much of it would be "Recapture as Ordinary Income".  That's where all this comes from.  So for this hypothetical example, the Sales Schedule would have shown $10,000 as Ordinary Income, and the tax bill would have been a ($10,000) loss on Sched E, a $10,000 Ord Income gain on 4797, and $0 for Sched D

[nexchap]

@naviator2003 

Question 1:  Adjust cost basis to 3,525-314+255 = 3,466

Question 2: Ordinary Income of 255, Partnership Basis of -255, for both columns.  On the next screen, you'll see that Cap Gain/Loss -- for the K-1 entries -- is 0.  You're handling that on the 1099-B.  But this will put the 255 on the 4797 where it belongs.

Question 3: 199A entries for QBI.  -103 goes on business income/loss line.  I put the 255 on the "Other Income" line.  And there's another line on that interview screen that asks something like "How much of the income above is Ord Income reported on 4797" and you'd put 255 here as well.

[naviator2003]

@nexchap Thanks so much for the reply! In response to:

Answer 1: Shouldn't the equation to determine correct cost basis be 3,525+255 = 3,780? 3,525 (Cost Basis) was derived from 3,839 (Purchase Price/starting Cost Basis) - 314 (Adjustments to Basis/distributions plus business loss). Your answer appears to subtract 314 twice. Not trying to challenge you, just want to make sure I understand the logic.

Answer 2: Does Sale Price need to be $0 on this part of the interview?

Thanks!

[nexchap]

@naviator2003 Q1:  You're correct.  You had already adjusted the cost basis for the 314.  I missed that.  $3,780 is right.

Q2:  Yes.  0's everywhere else.  You'll know you've done it right when the next screen shows $0 Cap Gain/Loss

[Totallyi]

Nexchap - amy thanks for your never ending help for hundreds of TT users.

Here's my situation:

I have purchase miniscule amount of USO back in 2020 (~$500 worth) and sold part of it in 2021. 

1) I didn't even know I had to receive K1 in 2020 so I did not even reflect that purchase. Do you "think" I have to refile my 2020 tax returns?

2) In 2021, I have sold ~50% of my position (bought $245.85 (in 2020) and sold $500.60 (in 2021). My 1099B was imported through SoFI/Apex directly into TT

3) My K1 shows: $345 other income in box 11 (with code C), $6 in box 13 (with code W), box 16 checked (?). No other numbers are on there. 

4) My Sales schedule shows: box 3 (sales proceeds) $500.60 (I wrote it in), box 4 $246, box 5 $224, box 6 $470

In the TT's Enter Sales Information, do I enter all Zeros?

In the TT's Describe the Partnership do check 3rd box from the top?

Huge thanks for all your help!!!!