About nexchap

nexchap

@TheHeurist-- With MLPs, the broker isn't reporting the cost basis to the IRS so adjustments are straightforward and aren't likely to generate questions. In your case you're better off having the broker correct the 1099-B if they reported an incorrect cost basis. Then there's nothing to adjust, or to explain the the IRS. As to handling this in the interview, just enter 0 for proceeds and cost in the K-1 interview: you report the Cap Gain in the 1099-B section, and the other K-1 stuff in the K-1 sections.

nexchap

@TheHeurist-- In that case, I can hazard a guess. And to be emphasize: its a guess. I haven't dealt with commodity partnerships, so take this as if a stranger 3 bar stools away was just yelling stuff at the TV. You may want to post a separate question to try to get a less guessy answer. But the reason Ordinary Gain is such a large part of MLP calculations is that they have these massive pipelines that have huge amounts of depreciation, and those depreciation calculations drive both the "Business Income" line (box 1) and the "Ordinary Gain" line on sale. Your commodity ETF likely doesn't appear to have any "Business Income", probably doesn't have any depreciation or inventory, and so probably doesn't have anything going on that would generate Ordinary Gain. So its not showing anything on the Sales Schedule because it is actually $0.

nexchap

@TheHeurist-- I don't think I can help. If I understand the question, you bought shares in an ETF (exchange traded fund) that is distributing K-1s? And individual sales schedules for the underlying holdings? I haven't run into that before, so don't know if they made the Ordinary Gain disappear somehow, or are simply leaving it up to you. And if they are leaving it up to you, I don't know how you'd calculate it on your own, since that's not generally possible with MLPs. Sorry I can't be more help.

nexchap

@kstheory-- I'm not sure I can precisely follow your a, b, and c below, but let me try this: Your total capital gain / loss for both Fed and State should match in any year you have a sale Ordinary Income, reported on Fed form 4792 and State form {IHaveNoIdea} will not match for non-conforming states. But if you compare the amount reported over the years for Fed vs State, the difference between them ought to match the difference you show for Suspended losses you get to report on Fed Sched E and State form {whosonfirst}. So, net net, the amount of actual income you pay tax on ought to match for Fed and State. Note that the bullets above assume the usual MLP scenario of suspending losses each year, and only having taxable events (excluding int/divs) when you make a sale (it should work in every case -- I just haven't gone through those weird corner cases to test it out). And I should also add, this is not legal or otherwise useful-in-an-audit advice! Just my best read after digging through everything for my personal non-conforming state. Its also the way my taxes have worked out when I've gone through sales and done the reconciliation.

nexchap

@kstheory: You're correct that a "net effect of 0" is the most likely outcome of all this non-conforming state stuff. Each year, you record lower losses. And then on final disposition, you record lower ordinary gain. And when you add it up, they offset. So its a bunch of hassle that you basically go through because we follow the rules. But also because its possible that you're state taxes might actually change in a given year as a result. For example, if the Fed losses were $100, with $300 in disallowed bonus depreciation, then your state tax would actually show a $200 profit that year and you'd pay tax. That's why I believe states impose this restriction. As to the question about taking those suspended state losses to offset your state gains on a complete disposition, absolutely. I don't know how to do that in TT for NY, but you definitely are allowed to.

nexchap · ‎May 25, 2020

@dj1016 -- That's an important caveat. What I've described will still get you through TT, but next year 'oldco', and its suspended losses, should just be deleted. As for what basis you should give your shares in 'newco', I'd look to them for guidance. There are a number of ways these deals get structured, and I'm not sure what the formula for figuring your basis should be. If 'newco' can't help, then I'd look to an actual tax preparer to give you a defensible position for the basis you choose.

nexchap · ‎May 23, 2020

@dj1016 -- you've got two different, but still common, events: You made a partial disposition. So you'd enter that just like this thread discusses. In the TT interview, you'd check off the "Disposed of a portion..." option, which will allow you to enter the sale info. Some of your suspended losses will be released. You'll also check the "This partnership ended in 2019" box, but on the next screen, you'd check "Disposition was not via a sale". This will address the non-taxable exchange for shares of newco. When you've done this, the only loose end will be the suspended losses that need to transfer to newco. Your TT return will still show them on the defunct MLP (oldco), even though its gone. I've found that the easiest way to deal with that is to wait until next year. When you're filling out your 2020 return, and entering the newco K-1, you'll get to the screen where TT asks you about suspended losses and carry-over from 2019. It will grab the 2019 newco info by default, but you can modify that screen to add in the additional suspended losses from oldco. Then you're done. All suspended losses are accounted for.

nexchap · ‎April 21, 2020

@kidoncorner -- I can give a little help, but probably not enough: 1) Cost basis going negative is where I tell folks to get help from a tax preparer who's familiar with partnerships. The issue is that the rules about how to handle suspended losses, and any cash distributions from the MLP, change as soon as your capital account hits 0. And how they change depends on any liabilities (recourse or nonrecourse) allocated to you. And since this may affect your prior year returns (depending on when you went negative), amending may be required. I'd bring in an expert is recommended. 2) I'm not familiar with the way TurboTax business sets up the interview, so can't help. 3) Try to do the over-ride on the 1099-B itself. In Premier/Deluxe, the results of the 1099-Bs flow to the 8949. Sorry I can't be more help.

nexchap · ‎April 20, 2020

@GoodShip -- sorry, but I don't know enough about the IRA issues with MLPs. Best to start a new post.

nexchap · ‎April 14, 2020

@confused123 -- This is a long-standing source of confusion in TT. Here's a long thread, with lots of examples in the comments, that explains the problem and how to work around it. https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/how-i-report-the-sale-of-mlp-shares-in-turbo-tax-i-sold-all-shares/01/776624

Date Registered	‎May 31, 2019 10:43 PM
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