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Question

Where do I enter sales information for an MLP? I received a Sales Schedule on my K-1 but I also received a 1099-B from my broker.

Forum|Forum|6 years ago
June 4, 2019
4 replies
0 views

My K-1 has a sales schedule with several line items, these are the various unit groups that I have sold, effectively ending my partnership. When I go to the K-1 section in turbotax, it asks if I have disposed of any units, but only allows me to enter 1 line item. However, on my sales schedule have about 6 line items, 6 different sales. I have no idea how to figure out my cost basis as 1 line item from the sales schedule.

My other question is what do I do about the sales of these units that are reported on my 1099-B? Do I also have to add them as reported sales of stocks section of turbotax? If so isn't that duplicating entries?

TurboTax Self Employed Online

ChristinaS

Employee

You want to notate the sale of the MLP in the K1 section, but you will report the real numbers in the 1099-B section of the program.

You may have suspended Passive Activity Losses, and these are "released" in the year of disposition. If you don't enter indicate that you disposed of the partnership interest within the K1 entry, you may lose out on suspended losses. That being said, put $0s for the sales price and cost in the K1 portion of Turbo Tax, as the real info should be reported in the (publicly-traded) stocks, bonds section via the 1099-B.

In the 1099-B section under Wages and Income, Stocks, Bonds and Mutual Funds, you will put the data from the 6 sales. Did you sell them all on the same day and purchase all of your units at least 1 year before the sale date? If so, you can likely combine as "Various" purchase date and 1 sales date?

How are the sales reported on the 1099-B? 6 line items? Or is it more succinct and less confusing? Do you know your basis for the entire interest as a whole?

Aquarius5Author

Unfortunately it's a mixed batch of 6 lots purchased and sold at different times. I have good records for my purchase and sales price for all of them. However, my understanding is that the true cost basis is calculated based on the Sales Schedule in my K-1, not what my brokerage reported. In the sales schedule they have filled in the columns for

(5) Cumulative Adjustments to basis (some of these are negative and some are positive)
(7) Ordinary Gain
(9) Alternative Minimum Tax Basis Adjustment

So for example one of my line items on the sale schedule is when I sold 455 units and I need help figuring out my actual cost basis to report on the 1099-B as you suggest:
(3) Sales proceeds: 500
(4) Purchase amount: 10,000
(5) Cumulative Adjustments to basis: -2500
(7) Ordinary Gain: 600
(9) Alternative Minimum Tax Basis Adjustment: -162

nexchap

TT does not provide helpful instructions on how to handle MLP sales. This has been an issue for years. But bottom-line, the K-1 interview section of TT is flawed, for the reasons below:

1) Partial sales: In these cases, the capital gains/losses must be fully recognized. However, if you enter them during the K-1 interview they're treated as passive and suspended (for cap losses) or used to release past years suspended losses (for cap gains). Neither is correct.

2) Mixed short/long sales: The K-1 interview only allows one holding period. There's no way to split between long and short term gains/losses

3) Complete dispositions, all in one holding period: This is the only case where the K-1 interview works, but you still have to deal with the 1099-B that came in from the broker.

4) Simply following the advice that pops up on the TT forms to enter 0 for sales and 0 for cost basis goes haywire as soon as you try to enter the Ordinary Gains that always arrive with a MLP K-1.

Because of all this, I handle all scenarios the same way:

Use the K-1 interview for the 'ordinary gain' portion of the MLP sale, but not the capital gain/loss. Do this by: 1) enter 0 for sales proceeds, 2) enter the ordinary gain numbers provided on the K-1. Note that there will be two ordinary gain numbers, one for Regular and one for AMT, and 3) set your basis as the inverse of the ordinary gain (for example, if ordinary gain was 100 (regular) and 90 (AMT), set basis as -100 (regular) and -90 (AMT). Doing this puts the ordinary gain into all the right spots on your tax return, but sets the capital gain/loss as $0 for both Regular and AMT.
Go the the 1099-B provided by your broker. There will be a cost they provide, which isn't reported to the IRS. This can be changed, so change it to whatever provides the correct cap gain/loss (you work out the cap gain/loss by using the K-1 worksheet).

As to the specifics of your calculation, in the case where you had:

(3) Sales proceeds: 500
(4) Purchase amount: 10,000
(5) Cumulative Adjustments to basis: -2500
(7) Ordinary Gain: 600
(9) Alternative Minimum Tax Basis Adjustment: -162

Your basis for this particular sale is $7500 (10,000 - 2,500). Your sale proceeds are $500. So your total loss on the sale is $7000 (500-7500). However, in any MLP sale a portion of the transaction is treated as ordinary income (taxed just like wages), and a portion is treated as cap gains/losses. So the $7000 loss is going to be broken into two parts: ordinary gain (the piece taxed like wages) and capital gain/loss (all the rest of it).

In step 1, you'd use $600 for regular ordinary gain, and $448 for AMT ordinary gain (600-162). Per my instructions above, you'd enter 0 for sales and -600/-448 for cost basis. Since you have multiple lots, you'd simply use the total ordinary gain rather than the per lot info.

In this case, for step 2, you have a cap loss of $7600. This is calculated so that the total of your ordinary gain + your cap gain/loss equals the 7000 loss from above ( 600 + -7600 = -7000). Since your 1099-B will show the $500 sales revenue, you'd enter $8,100 as the cost basis. This gives you the $7600 loss (500-8100).

It all seems complicated, but when you step back and look at what makes it onto the tax return, you'll see the $600 showing up on form 4797, and from there to your 1040 line 14. You'll see the -$7600 on your Sched D, and from there to your 1040 line 13. And, assuming you had suspended losses from prior years, you'll see them pop up on Sched E, and then on 1040 line 17.

**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!

Boyan

Employee

Can you run a scenario where the K-1 import file (the .txf download from TaxPackage Support) and the brokerage 1099 (directly imports over the Internet) are both automated and not a manual data entry. Where does one need to manually adjust? I imagine one of the two needs adjusting ONLY meaning you let both import but just touch the K1 part and let the 1099 stay as the data came in? Thank you

nexchap

The instructions provided by TurboTax in this area are inadequate. Here's a link to a similar question, that provides some detailed instructions: https://ttlc.intuit.com/votes/11315903?notification_token=961494f328b004232914f0459c04369e

**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!

marvin5679

I do not know why TurboTax has not updated how it handles the sale of MLP units. A prior contributor offered a solution which works for me, so here again "

On the MLP (K1) screen, show partnership ended, and that you disposed of your units by a sale. Further on the screen asking for sales and basis, enter zero for basis, enter the ordinary gain or loss in that box, and enter the inverse reported gain amount in the basis box

So an ordinary gain of 240 is entered in the basis box as -240. The end result is that the gain goes on form 4797

AND there is nothing that will duplicate the information on your form 1099 B from your broker that goes on form 8949.

On your entry from your broker statement for the sale of the MLP enter the total sales revenue, and the cost as shown,

and check the box below for incorrect basis. When the correct basis screen comes up enter a basis that will result in the correct capital gain or loss based on your sales worksheet calculations. You may want to provide a supplemental statement to explain this code B adjustment.

Then there is also the issue that the K1 interview assumes that sale took place in one time period, without providing for short term and long term sales. But that is not necessary since the 1099 B will have that information reported as

code B for short and code E for long since neither basis is reported by the MLP to the IRS. So you have to adjust the Code B basis to reflect short term capital gain or loss and ditto on code E.

All of the above has been posted previously by another contributor. I am only repeating it for those who did not read the original. But my question is. WHY IS THIS NOT BUILT INTO THE PROGRAM ITSELF. THIS WORKAROUND HAS EXISTED FOR SO LONG THAT IT IS TIME TURBOTAX MADE IT PART OF THE PROGRAM. !!

LaJolla

Employee

Marvin could you please clarify to whom you are responding to, since your reply was under my comments, but your comments does not appear to apply to my situation or answer my question.

I was wondering where you are getting the "240" from. In your comments you mention the "ordinary gain of 240" should be entered on basis box as -240 is a theoretical since the early example provided by "giveittome" and answered by "Next champ" she had ordinary gain (600) and 90 (448) . In the my case my it appeared to me that my ordinary gain should be $ -3257.11 (Capital Gain/Loss: Total Gain-Ordinary Gain (635.89 -3893) = -3257.11) and I was hoping that Next Chap would be kind enough to look over my numbers to make sure I followed his stepwise approach correctly. Thanks

marvin5679

I made a few typos so let me try again. The sales worksheet attached to the K1 that I sold in 2020 showed the amount of ordinary income that is determined by the MLP itself .

'If you are interested, the reason that this is not all capital loss or gain involves the "recapture" of accelerated depreciation tax benefits when the MLP is sold. (and I mean fully disposed of, not a partial sale). Be that as it may, in the K1 interview , you are asked for sales and cost basis and also the amount of ordinary income or loss reported on the worksheet. That was 240 gain , which is carried to form 4797. Entering the gain there on the interview accomplishes that. Then enter in the cost basis box the same amount, but as an inverse. (if the ordinary gain is 240 enter -240 in the basis box. And then enter zero in the sales proceeds box.

The net result is that you have taken care of the 4797 entry,

and shown a zero gain on the sale itself, so that there will be no duplication with the entry from your broker statement for its reporting of sales proceeds and cost.

But you have to adjust the broker reported basis to produce the correct capital gain or loss, The sales proceeds are unchanged. When you do the worksheet, you indicate your proceeds, and your cost basis which should be the same as your broker reported. So assume 10000 proceeds

and 12000 cost. That 12000 has then to be reduced by

the adjustment to basis based on the recapture , which is an amount furnished by the MLP. so assume that adjustment is -6000. So your adjusted basis is 12000-6000 or 6000.

Your proceeds are 10000 so 12000-6000=4000 total gain.

If 240 has to be reported as ordinary gain, then 4000-240 is the amount of capital gain (or loss when applicable).

ie 240 ordinary 3760 capital gain- total 4000.

In my actual transaction, I had a capital loss and a positive ordinary gain

So I go back to the 1099 B entry on form 8949 and adjust the broker reported cost so that a gain of 3760 is produced and reported via form 8949. I report the basis adjustment on the "basis as reported is not correct" box and then enter the required amount to produce a 3760 gain. Remember that the PTP has not reported a basis to the IRS, so your 1099 B

is either sales category B or E (short or long non reported)

But there is one other factor. The sales worksheet sometimes does not distinguish between long and short term correctly, or it it does, it is as a percentage (for example 92long 8 short. Since the broker is showing both entries in B and E

if you held the MLP long enough, you have to make the above cost basis adjustment to both the short (B) and long (E) entries, using either the percentage furnished by the MLP

or what you calculate on your own. The ordinary gain going to 4797 is a single number that is not broken down into long and short.

Again this workaround is not original and was posted previously by another contributor, but I found this to be doable and eliminate the duplication of sales proceeds

and also the creation of those bothersome category C

and F 8949 that some workarounds produce.

So I hope this helps, and credit should go to whoever posted this originally. PS I have not mentioned the AMT amounts because AMT is no longer an issue for me.

So end result 4797 is ok, capital gain or loss is ok, and there are 2 "b" adjustments on 8949 B and 8949 E.

You may wish to attach info to explain the b, but that seems to have taken care of everything. Again my same question

why does TT not build this into its program? so those b adjustments are automatic once the ratio between short and long has been entered???