K-1 final sales schedule gains reported on form 4797 business sale and 1099B

[dkmein]

The ordinary gains from a K-1 final sales schedule has resulted in the creation of form 4797 business sale.  I have revised original answers to the K-1 sales schedule interview questions and modified the cost basis in the 1099-B per direction in other threads to correctly report the gains.  Seems like this form is now double reporting.  Can  I delete the 4797 form?

[ScruffyCurmudgeon]

The 4797 is necessary.  The sales schedule, particularly of a partnership and more so of a PTP, may not be up-to-date, and should represent a zero balance if this is a Final K-1 with all interest in the activity disposed of.  As to the Cost Basis, if this is being reported on a Form 1099-B to you, the difference in what is being reported to what you originally paid is likely due to the fact that the basis has been reduced, by action of the IRC, when previously disallowed losses are now in this final year allowed, and so reduce the basis.

[nexchap]

When you sell, your total gain is taxed at 2 different rates:  part of it at the cap gain/loss rate, and part of it at the 'ordinary' rate.  So the amount that showed up on 4797 is the amount being taxed at the 'ordinary' rate (which is why its referred to as 'ordinary' gains).  There's no double counting if you've adjusted the cost on the 1099-B to reduce your Cap Gain by this Ordinary amount.

Example:  Sale $100, Cost Basis from K-1 $30 gives a total profit of $70. 

• If Ord Gain is $50, then you want a Cap Gain of $20.
• So you'd adjust your 1099-B cost basis to $80 ($30+$50), resulting in a Cap Gain of $20

[ScruffyCurmudgeon]

The answer referring to having to make an adjustment to Basis was specifically in the case, as noted, where the reporting authority fails to include the basis as properly adjusted for prior deferred losses in prior years (see TurboTax Forms Mode Schedule K-1 Page 3 Section A