Selling MLP Shares

[des779]

I sold all of my Energy Transfer shares last year.  Am I still required to enter all of the K1 data,

[HelenC12]

If you reported the MLP shares on your 2020 (last year) income tax return (the final K-1) and you don't have anything to enter on your 2021 income tax return, delete the K-1. 

[des779]

I sold them in 2021 and received the Final K1 a couple of weeks ago.

[HelenC12]

Yes, you're required to enter all your K-1 data in TurboTax.  Make sure you check the box that reads "Final" otherwise the K-1 information will transfer to your 2022 income tax return.

[des779]

Thanks!  That's what I thought.  We it comes to entering all of the data about the sale, is there someone I can talk too (pay if necessary) about that or is it best to start a new post with the detailed questions? 

[nexchap]

Not only do you need to enter all the K-1 data (probably broken into 4-5 K-1s, since ET reports 3 different entities and a couple have box 1 and 2 income), but you need to be careful in how you handle the sale info:

- The K-1 interview will have a screen to enter the sale data, but that can result in double-counting the cap gain.  You want to only use this screen for handling the Ordinary Income reported on the Sales Schedule ("Gain subject to recapture....").

- The cap gain gets handled on the 1099-B interview.  But you have to adjust the cost basis on that screen.

There's more detail, and a ton of examples, in this thread: https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/how-i-report-the-sale...

[des779]

Thank you!  On the sales worksheet their is a column labeled "Gain Subject to Recapture As Ordinary Income" which in my case is $60,000+.  Is this the accumulated depreciation that I now have to pay ordinary income tax on?  Does anything offset this?  thanks.  

[nexchap]

@des779 Your suspended losses will be released to Sched E, and these will largely offset the $60k.  Also, when you adjust your cost basis, the Ord Income reduces any Cap Gain.  Your cost basis is [purchase price]+[cumulative adjustments]+[ord income]

[des779]

Thanks Champ!  Please bear with me as I want to better understand.  As an example

Purchase Price $162,000 + Cumulative Adj -$130000 + Gain Subject  to recapture as Ord Inc  $62,000 equals Revised Basis $94,000.   Sales Proceeds $68,000.  $68,000 - $94,000 = Loss of $26,000.  Am I correct so far?  If yes, how does this get entered on the Sale Information worksheet?  Thanks

[nexchap]

@des779 That part of it would be handled on the 1099-B.  I assume you got one from your broker.  It would show the $68k received (and that would be reported to the IRS), but the cost it shows isn't reported, and is wrong.  So during the interview, there will be a spot where you can check "The cost is wrong" and enter the correct number:  $94k.  That successfully handles that part of the sale.

On the K-1, you just want to handle the Ord Income.  So you'd enter 0 for sales, $62k for Ord Income, and -$62k for basis.  There's also an adjustment for AMT, so you can handle that in the 2nd column if AMT affects you.  That will get the $62k onto form 4797 where it belongs.

[des779]

Thanks again!  This isn't a question but it seems that the ordinary income gets added in twice - once to increase the basis and again of form 4797.  Maybe it's being able to apply the accumulated losses that neutralizes that (as you said earlier).

As you probably know Energy Transfer has multiple K1's and I have diligently entered K1 details for each each income stream including USA Compressor Partners and Sunoco LP.  I don't know if I should enter the sales data on each one or just the primary one?

[nexchap]

@des779 The way to think about it is like this:  you sold for $68k.  Your cost (adjusted just for the -130k) is $32k.  That's a profit of $36k.  In a typical stock sale, that $36k would be a Cap Gain, getting preferential tax rates, and you'd be done.  But the IRS doesn't treat PTPs that way.  They recognize that some of that gain is being offset by Sched E losses (Sched E losses are taxed at 'ordinary' rates, not the preferential CG rates), so they go deeper and split the $36k:  some of it must be taxed at 'ordinary' rates, and the remainder get's the preferential CG rates.  In your case, $62k is going to get 'ordinary' treatment, leaving you with a Cap Loss of $26k.

As to the data entry, the $62k is probably split across ET, USAC, and SUN (you'll see one of the line 20 codes detailing the split -- you'll know which one because it adds to $62k) so you'd handle each one using its share.

[des779]

Thanks for all of your help/answers and patience as you answered my questions!  I believe I am ready to enter the K1 date.  I already finished adjusting the 8949 data.  I'm anxious to see the accumulated losses kick in as I complete this.