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

[rolanddawson2500]

First, maximum kudo's to nexchap. I am somewhat concerned about nexchap's statement of correcting the Brokerage Report with the basis instead of taking it to zero, and then using original cost and revised basis on the K1's. As I understand it, the MLP will report to IRS, where the Brokerage did not. I changed the brokerage to zero, and then used the adjusted basis (against original cost) for the gain. Is this a problem? Seems like it should give the right answer, and agree with what the MLP reports to the IRS???? If not, I will have to amend, but am going wait a while, I was still getting corrected brokerage statements (return of capital and amortization of bonds) as late as August last year. What do people thin?

[rolanddawson2500]

Opps, should have been clearer: "As I understand it, the MLP will report to IRS, where the Brokerage did not. I changed the brokerage to zero GAIN, and then used the adjusted basis (against original cost) for the gain ON THE K1 INTERVIEW FORM." (Capitalized the change in the sentence above.)  

[choccobo]

hey roland, as far as I understand nexchap's method, you don't change the brokerage to zero gain.  you change the brokerage basis (which the IRS won't know, since it's not reported) to purchase amount + capital adjustments + ordinary gain.  what ever difference between that number and the sell amount will be the capital gains portion of your sale.  the ordinary gain will be what's reflect by doing your k-1.  and you do the whole "sale amount = -ordinary gain" on your k-1 interview to force the capital gains to zero for the k-1 interview portion.  so in the end, your 1099 portion will only account for your capital gains, and the k-1 portion will only account for your ordinary gains.

[choccobo]

so... I called APO's line from partnerdatalink.  and the person there read a response from APO that they just simply do NOT furnish a sales schedule for their unit holders.  WHAT IS THAT??!!  WHY NOT?

so... I am at a loss as to how to figure out my numbers.  I skimmed through two other companies' K-1s, and the capital adjustments look like the sum of the previous years' capital changes (box L, "current year increase/decrease," minus the distributions (box 19, item A).  but how do I figure out the ordinary gains upon my 100% disposition?  I can't seem to figure out which numbers to mash together, or if that's possible to do at all...

[rolanddawson2500]

Hey chocobo, thank for clarification. I have already filed, but will run this through the TT program and see if comes up with same answer, I think it should???. The reason I did it the way I did was so the K1 form in TT would show some gains, but I now see that since Schwab doesn't report this to IRS, it would not have mattered. Probably have to file amended return anyway, got 2 corrected 1009's last year months after 4/15, assume I will this year. Ouch on APO.

[nexchap]

@MLPguy1 @choccobo @rolanddawson2500
I normally monitor this thread during tax season, but TT glitched and didn't let me know there were any new comments.  Just noticed these:

@MLPguy1: If you sold everything, you definitely want to check that you had a complete disposition.  And its possible your rebate will go up as a result.  The reason is that the complete result of your MLP experience (when you add together the Ordinary Gain, the Capital Gain, and all the Passive Losses) may be a loss, reducing your taxable income, which reduces your taxes and ups your refund.  So the bad news -- it was a money-losing investment.  The good news -- lower taxes.  And note -- you mentioned that you hadn't been taxed on your distributions, but they're all included in the "Cumulative Adjustments to Basis", so they get covered in this final result.
As for understanding the passive losses:  go into Forms mode and find the K-1 Partner worksheet.  Scroll down, and Section A will show you how it works.  Column (a) is what got added/subtracted this year.  Column (b) is the carryover from last year.  Column (c) is what is actually used on your taxes this year.  And Column (d) is what flows to next year.

@choccobo:  I'm not familiar with APO, but I've always found PartnerDataLink to be extremely unhelpful (unlike taxpackagesupport, which usually has whatever info is required).  I'd consult a tax specialist before trying to estimate Ordinary Gain.  One other option is to contact Investor Relations for APO to see if they have any ideas.

@rolanddawson2500: If you did a complete disposition, where all the shares were short or long term, you can get away with setting the 1099-B to 0 gain and doing everything in the interview process (though it complicates your 1099-Bs, since you have two entries for the same transaction).  But that's the only time it works.  If you have short and long term, or a partial disposition, TT won't calculate the right taxes if you put any capital gain/loss through the K-1.  For simplicity, I just do all sales the same way.

[MLPguy1]

Thanks for the advise Nexchap! I'll take a look at forms mode.

[rolanddawson2500]

Thanks for all the help on this Nexchap! I am going to go trace the losses you mentioned on MLPguy1 reply, just to check if they did move forward. We did do a complete disposition, all long term. Using the interview process, (after zeroing the 1099B from Schwab on the ETE/ETP)  makes the Form 8949 show the capital gains (less the ordinary income portion) while the Form 4797 has the ordinary income. When I add the 2 together for each MLP, I come up with the Sales Report that is on the K1. It was confusing for a while, since the 8949 did not tie to the MLP K1. However, when you add back in the "ordinary gains subject to recapture as ordinary income" (Form 4797, Par II, Line 10), it ties within a 1$, rounding error of the Average cost basis! Yea.

[k1_learner19]

@nexchap Thanks for your time and kindness to share your knowledge. This is very useful information to deal with K-1 and 1099B entry correctly. I am not as good as most others here to handle K-1, and I would like to ask K-1 related questions for my return. I sold AB K-1 in year 2018 and received K1 (including K1 Sales Schedule) and 1099B for this transaction.
On my K-1, BOX9c-Unrecaptured section 1250 gain, it has "1" there, and BOX17-Alternatie Minimum Tax (AMT) Items, it has "-3" there. On K-1 2018 Sales Schedule, it didn't show " Unrecaptured section 1250 gain" and " Alternatie Minimum Tax (AMT) Items" in any columns.  I would like to know: (1) do I still need to enter "1" and "3" for "12450 gain" and "AMT items" under "Enter Sales Information" Section on TurboTax K-1 interview section since I have entered those information in BOX 9c and BOX17? (2) K-1 2018 Sales Schedule in column-7 (Gain Subject to Recapture As Ordinary Income) has "$400" there. Right below the number, it said to put on "Form 4797 Part II Line 10" and "Form 8949 Column-G".  Will TurboTax take care of the "$400" when I go through TurboTax interview? The column instructions on Sales Schedule said: "Reporting this amount of $400 as a negative adjustment in Column-G of Form 8949 should generally result in the correct capital gain or loss. Do I need to make any manual adjustment in my TurboTax entry OR will turboTax takecare of this negative $400 on Column-G of Form 8949. If not, how should I fix it? Thanks in advance for your response and assistance!

[spoede1026]

I apologize, but I simply don't see any data for "ordinary gain" on any of the MLP K-1s I've been provided. That's something I can calculate, but your answers state that it should be on the K-1 itself, or am I misreading?

My K-1s are like the poster above - they have a column on the Sales Schedule entitled "Gains Subject to Recapture as Ordinary Income", but no "Ordinary Gain". Reading the instructions that come with the Sales Schedule provides no help whatsoever in figuring out what to enter and where to enter it in TurboTax.

[nexchap]

@spoede1026:  Your "Gains Subject..." may be the same as the "Ordinary Gain" that has showed up on all my K-1 Sales Schedules.  Does your K-1 include any instructions on where that entry is supposed to go on your return?  All mine show that it belongs on Forrn 4797 Part II Line 10.  If yours is the same, its just a different label for Ordinary Gain.

[nexchap]

@k1_learner19:  On your questions 1) The values on the K-1 box 9 and 17 don't affect the Sales Schedule.  Enter them on the K-1 and TT will handle it.  2)  TT will transfer the $400 to Form 4797.  But to be sure, I'd encourage you to just experiment a little.  Look at Form 4797 (in Forms mode) before and after completing this K-1.  You should see it increase by $400.  As for the 8949 Column G, TT won't automatically do that.  You need to figure out your capital gain/loss using the Sales Schedule, and then go to the 1099-B (I use Forms mode for this) and enter in a corrected basis (line 7a in your 1099-B will be what the broker provided; you can enter a revised number on 7b).  The number you use for the corrected basis is whatever value, when subtracted from your proceeds, gives you the right cap gain/loss.  Note that when you do this, you'll see an adjustment on 8949 Col G, which will be the difference between the broker provided cost and your revised cost.

[spoede1026]

@nexchap Nope, the instructions state: "The instructions to Form 8949 are unclear in the determination of capital gain 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."

[k1_learner19]

@nexchap Thanks a lot for your quick response! I was playing around and found that If I go to 1099B in TurboTax and enter it under "I will add additional information" then enter "Correct Cost Basis", If I use the Cost Basis# of $2726+$400 of ordinary income, it will show up negative -$400 under Form 8949 Column-G with code "B" under column-f, will this be the correct way to handle that negative -$400 in Form 8949 Column-G?  Thank you again!

[nexchap]

@k1_learner19:  The critical test is to verify that the cap gain/loss reported on the 1099-B, and the value on the 4797, sum to the correct overall gain/loss (which you calculate on your Sales Schedule).  If they do, you've got it right.