How to file a K-1 correctly if Robinhood is already reporting the sale of shares for which I also got a K1?

Forum|Forum|4 years ago
April 10, 2022
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I bought and sold shares in an oil fund (USO) that sent me a K1, but I see Robinhood is already reporting the sale in their 1099-B, do I need to fill out the K1 also? If so how to fill K-1 correctly and avoid duplication of tax?

Like for my case - I sold all shares of USO in 2021 (i.e. partnership ended).

So I entered Sales Information while filing K-1 ("Sale Price", "Partnership Basis" etc, I don't think I have "Selling Expense", "Ordinary Gain" for this..right?). The numbers entered here affect my tax amount, as well as the numbers entered in the 1099-B section reporting sales proceeds and cost basis for the same sale (done by Robinhood's 1099-B form automatically).

For eg -

From Robinhood's 1099-B entry, Cost Basis is 2750 USD and Proceeds is 4900 USD, so a total Gain of 2150 USD (Long term sale). And according to the Sales Schedule that comes with K-1, my updated Cost basis is 5000 USD (after it added 'CUMULATIVE ADJUSTMENTS TO BASIS' 2250 USD to Initial Basis amount/Purchase Price) and the K-1 instructions on the sales schedule say to get the sales proceeds from the broker, i.e. Robinhood, i.e. 4900 USD.

Also, the K-1 form has 1750 USD amount in Part III, Line 11, c (Sec1256, Contracts and Straddles), which also increase the total tax I owe. In Part II, Section L, the K1 form has "Beginning capital account" as 3300 USD, "Current year net income" as 1700 USD, "Withdrawals and distributions" as 5000 USD and "Ending capital account" as 0.

So where exactly do I enter what numbers? Do I change the adjusted basis in the 1099 section entry (that is added by Robinhood) to 5000 USD as per K-1 or just delete this entry whole together. If so I see Robinhood mentions in 1099-B form for this entry "Basis is provided to the IRS", so not sure if I can change it?
If I adjust the basis in 1099-B, then do I leave the "Enter Sale Information" screen of the K-1 section completely blank? Because if I fill the Sales detail at both places then Turbo-Tax double-counts the gain from the sale. Also what to do with "Part III, Line 11, c (Sec1256, Contracts and Straddles)" entry because as soon as I enter it I see my tax amount increases a lot.

Please help me out in telling where I have to fill what numbers. Do I just fill out the K-1 part and not include the sale on the 1099 at all (i.e. delete the Robinhood 1099-B entry, remember acc to Robinhood "Basis is provided to the IRS" for this).

EDIT - I bought these shares in 2020, so I got K-1 form in 2020 also and last year I filled all info in Turbo Tax in 2020 Tax return and K-1 form's "Part III, Line 11, c (Sec1256, Contracts and Straddles)" had 550 USD for which I paid some extra tax last year (this amount splited and ended up in Line 4 and Line 11 of Schedule D form in tax return).

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nexchap

You definitely enter all the K-1 info. In the K-1 sale section, you can leave everything blank (or 0). This will make sure the other K-1 entries are categorized correctly.

On the 1099-B interview, you'd change the cost basis to 5000. Note that the 1099-B from Robinhood should be code B or E (meaning cost NOT reported to IRS). If they didn't code it that way, they made a mistake because they can't know the correct cost basis. You might be able to get the to correct it, but if not you still need to make the correction yourself. In the unlikely case that the IRS ever sends an inquiry about it, the K-1 is all you need to explain why you made the change.

**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!

djainAuthor

@nexchap

Yeah, Robinhood mentioned it as Code D in 1099-B form (i.e. Basis is provided to the IRS). I will try to contact them but I'm not sure If they will correct it and I will get an updated tax document from them before 18th April deadline. Is it still ok to modify the cost basis or delete the entry in such a case?

So which Sales entry I should keep -

1. Leave everything in K-1 Sales section as blank. And manually adjust the cost basis in corresponding Robinhood USO sale entries.

2. OR, enter the K-1 sales sections while using the Proceeds amount from RobinHood 1099-B form and delete the 1099-B entries made by RobinHood for USO.

nexchap

@djain Definitely change the cost. They're your taxes. Robinhood's error doesn't change the requirement that you report accurate data.

As to approach, either gets you to the same tax return. My preference is to avoid using the K-1 for Cap Gain reporting, since there are circumstances where it can create errors. So I always handle the Cap Gains in the 1099-B interview for consistency.

**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!