How to elect short/long term for gains from USO ETF - K1 (1065) vs 1099B

Forum|Forum|4 years ago
March 28, 2022
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Hi! Need some help with properly reporting my gains from USO ETF to avoid double taxation

Context: I purchased all my USO shares in 2020 and received a K1 and reported "gains in my 2020 tax return (even though I did not sell any shares in 2020). I sold all my USO shares in 2021 and have received a final K1.

Questions:

1. Should I enter my K1 as it is? how can I indicate the short term portion and long term portion? 90% of my USO shares have been held for more than one year at time of sell, therefore I think should be considered as long term gains. However, I can't indicate this when entering the K1.

2. Should I also enter the 1099B? do I need to adjust anything? in 2020, I did pay tax on ~$2K "gains" (I did not sell any shares in 2020 but it is considered as income in 2020 K1). Do I need to do anything to avoid double taxation?

TurboTax Premier Online

nexchap

You'll handle the sale in both the K-1 interview and in the 1099-B.

In the K-1 interview, you only handle any Ordinary Income (if you have it). You force any calculation of Cap Gain to 0. There's no way to handle a short-term/long-term split here, but that doesn't matter for Ord Income.

In the 1099-B interview, you'll handle the actual Cap Gain, adjusting your cost basis as required to get the right Cap Gain.

Here's a longer discussion that addresses many, many follow-up questions: 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/00/776624

If you have other questions, you can post back on this thread or on that one.

**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!

JamesChenAuthor

Hi nextchap,

Thank you so much for the quick response. I read through the discussion link and it is very helpful. I just want to confirm that I got this correct. Below is my understanding, am I doing this the right way? I am gonna use some dummy numbers to keep it easy for me to follow.

On my K1 form: I have value in the following sections

Part II section L

Beginning capital account: $5,000

Current year net income(loss): $2,000

Withdrawals and distributions: $7,000

Part III

11 Other income (loss): $1,800

13 Other deductions: $200

I don't have any ordinary income on K1. When you say force Cap Gain to 0, do you mean the value I have in "Current year net income" and "11 Other income"? Can I just put 0 in all these fields, so they are showing up as 0?

In my 1099-B form, it includes the following info

Quantity sold: 300

Date solde: 3/10/3021

Proceeds/Reported to IRS (box 1d): $7,500

Cost basis: N/A

In Turbo Tax, when completing the 1099-B form, I entered the transaction date and selected whether it is long term or short term, then I entered the following info

Proceeds: entered $7,500 (from my 1099-B form)
Cost basis: entered $7,000, which is the value I found on my Sales Schedule (came with the K1 form and it says form 8949 at the bottom) Column 6 "Cost basis" $7,000. In the instruction, it says that Column 6 = Column 4 (Purchases Price/initial Basis amount) + Column 5 (cumulative adjustments to basis). Is this what I should use as the cost basis?

Am I doing this right? Seems strange that with the adjusted cost basis, the total gain is now $500 vs. what's listed on the K1 which is $1,800 or $2,000.

Thank you in advance and look forward to your response!! Much appreciated!! This is way to complex.....

nexchap

@JamesChen Agree its way too complex....

On the K-1 interview, there's a screen for entering the details of the sale. Because you don't have Ord Income, you'd just enter 0 for everything here. On the rest of the K-1 interview, you'd enter the values and line items as reported. Note that the line 13 "other" deduction of $200 is going to need more info: it could go to a variety of places on the return, so you'll be asked to provide an explanation of what it is. Only the K-1 preparer (or the K-1 fine print) will be able to answer that.

On the 1099-B, $7000 would be the cost basis assuming the K-1 correctly shows what you originally paid as the Purchase Price.

As for understanding all this, the Part 11, section L stuff is just for your records. But what its telling you is that the Partnership generated $2,000 in income. Because you're a partner, you have to report that on your income taxes even though you didn't actually see the cash (TT does that when you enter the K-1 values). But that's also why your cost basis is adjusted. Assuming you paid $5000 for these shares, your Cap Gain would have been $2500 if your cost basis wasn't adjusted. But recognizing that $2000 that is reported elsewhere, you're able to change your cost basis and only report a $500 Cap Gain.

**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!