Enter the k-1 info
Check the PTP box
If total disposition proceed as follows:
Check final K-1 (s/b marked on actual k-1)
Check sold or otherwise disposed of entire interest
On the k-1 disposition section for sales price use the ordinary income (sometimes you’ll see a column with the “751” or the words “Gain subject to recapture as ordinary income” or similar wording. This info comes from the supplemental sales schedule that should have been provided. It's also now on the k-1 box 20AB - no 20AB, no ordinary income column so then the sales price is zero. The numbers I’m using represent the line numbers in forms mode (desktop only)
- Sales Price = line 20AB (1065 k1)
- Selling expenses = 0
- Basis = 0
- Gain is computed and should be same as the sales price.
- Ordinary gain = enter same as sales price
This amount flows to form 4797 line 10 and is taxed as ordinary income. This step is necessary, so any suspended passive losses are now allowed.
10,11,12 should be blank
Now for the 8949.
The broker’s form is probably coded as B or E – sales proceeds but not cost basis reported to the IRS. This is because the broker does not track the tax basis. It used what you paid originally which is not correct.
The correct tax basis is:
NOTE that your adjusted cost/tax basis, before any "751" recapture may already be on the sale schedule so all that's needed is to add the "751" amount. You can then skip the rest of this paragraph. What you paid originally, should be the same as what is on 1099-B as cost, Then there is a column on the sales schedule that says cumulative adjustment to basis. If it’s positive add it to the original cost. If it’s negative subtract the amount. Finally add the amount of ordinary income reported above, if any.
Some other things. Look at lines 20AB. That number should be added to the ordinary income above for reporting the 199A (qualified business income from the PTP). You don’t have to enter this but then you lose out on a tax deduction = 20% of this amount.
