Does TurboTax 2022 handle K-1 (Form 1065) reporting for sales based on the K-1 interview OR do I also need to enter 1099-B from my Brokage (with updated cost basis)?

Forum|Forum|3 years ago
March 10, 2023
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I've read several posts on this and still a bit confused - mostly around TT not handling K-1s very effectively. The K-1 interview "Enter Sales Information" screen seems to indicate that TT will handle reporting correctly without the need to enter the sale(s) via a 1099-B. Some posts seem to indicate that entering a 1099-B with an adjusted cost basis is also required (and will avoid duplicate reporting) in addition to the K-1 interview. I bought and sold all shares of a publicly traded MLP in 2022.

Via the K-1 interview - "Enter Sales Information" screen, I entered the following:
Sales Price: $X (as total proceeds from sale(s) found on my Brokerage statement)
Partnership Basis: $Y (as reported in the K-1 Sales Schedule as "Cost Basis")
Ordinary Gain: $Z (as reported in the K-1 Sales Schedule as "...Recapture as Ordinary Gain)

Do I also need to enter a separate 1099-B for this sale?
Thank you so much!

TurboTax Premier Online

Best answer by nexchap

@dpreas2017 In certain circumstances, TT will give you the wrong tax results if you enter the sale information on the K-1. You have to use the 1099-B from your broker to manage the cap gain/loss. Only use the sale worksheet on the K-1 to enter the Ordinary Gain.

Unfortunately, if you enter the Ord Gain on the sale worksheet, you have to make sure that entry doesn't create its own Cap Gain/Loss. So enter $0 for sales, and enter the inverse of the Ord Gain for basis (both 'Regular' and 'AMT', since the Ord Gain is different for both). This will result in the K-1 calculating $0 for Cap Gain/Loss.

As an example, if the Ord Gain is 100 'Regular' and 97 for AMT, you'd enter -100 and -97 on the basis line.

DaveF1006

I had a similar question earlier where the OP said that both were reported on a1099B as well as K-1 and this duplicated his/her income. I advised the OP to report the K-1 and not the 1099B but after reporting the K-1, to make sure that the information is reported as an investment sale on Schedule D and/or the 8949, if one is generated.

If so, do not report it as a Schedule B because it will duplicate the income.

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nexchapAnswer

As an example, if the Ord Gain is 100 'Regular' and 97 for AMT, you'd enter -100 and -97 on the basis line.

**Say "Thanks" by clicking the thumb icon in a post**Note also, I'm not a Tax Preparer/CPA. Just a volunteer, seasoned, TurboTax user. Use any advice accordingly!

dpreas2017Author

@nexchap Thank you so much for your response. I still have a question about how to adjust the cost basis reported in the 1099-B via K-1 information. So that I understand the full process you are recommending, the script of your example will look like this:

Via the TT K-1 interview - Enter Sales Information screen:

Regular Gain or Loss:
Sales Price: 0 (this will be reported to TT via the 1099-B)
Partnership Basis: (-100) (inverse of the Ordinary Gain listed in the K-1 sales schedule)
Ordinary Gain: 100 (as reported in the K-1 Sales Schedule as "...Recapture as Ordinary Gain)

AMT Gain or Loss:

Partnership Basis: (-97) (inverse of the AMT Gain/Loss Adjustment listed in the K-1 sales schedule)
Ordinary Gain: 97 (as reported in the K-1 Sales Schedule as "AMT Gain/Loss Adjustment")

Then, I will enter the brokerage 1099-B information for the sale in TT. The cost basis reported in the 1099-B must be adjusted by the amount listed in the K-1 considering the following:

If the K-1 shows a loss, I will increase the amount of the 1099-B cost basis by that amount so I'm not paying taxes on the K-1 loss.
Inverse, if the K-1 shows a gain, I will decrease the amount of the 1099-B cost basis by that amount so I'm paying taxes on the K-1 gain.
Correct?

Question: For the 1099-B cost basis adjustment, is the K-1 loss/gain reported in box L under "current year net income (loss)" OR in the K-1 Sales Schedule under "Cumulative Adjustments to Basis"? For me, these two numbers are different.

nexchap

@dpreas2017 You adjust the 1099-B using the Sales Schedule. Assuming your Sales Schedule reports "Cost Basis" and "Gain Subject to Recapture" (Ordinary Gain) your cost on the 1099-B would be the sum of those two entries.

Note that "Cost Basis" is just the total of what you paid for the stock plus "Cumulative Adjustments to Basis".

**Say "Thanks" by clicking the thumb icon in a post**Note also, I'm not a Tax Preparer/CPA. Just a volunteer, seasoned, TurboTax user. Use any advice accordingly!