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Question

MLP K-1 Long Term Sale - How Do I Enter K-1 and 1099-B???

Forum|Forum|4 years ago
March 12, 2022
1 reply
0 views

I purchases shares in a MLP back in 2011, not realizing what I was getting into at tax time. The purchase and distributions, which were reinvested. Distributions stopped several years ago. I sold ALL shares on 11/22/2021 and residual shares sold on 11/24/2021 for a capital loss.

I downloaded the Turbo Tax package from the MLP and imported it in TurboTax Premier 2021. I have been able to file the taxes in Turbo Tax each year, but selling/liquidating all the shares is much more complicated. Even though I took a large loss (large for me), TurboTax shows I owe a substantial amount in Federal taxes.

This is the first and only time I sold shares, so I have never dealt with the MLP Sale Schedule and corresponding 1099-B resulting from the sale.

Below is an example of my Sale Schedule and 1099-B information.

Below is the information that I have entered:

- Choose the type of Partner: Limited Partner or Other LLC Member

- Choose the Type of Partner, Both of Us are a: Domestic Partner

- Enter the Percentage of Your Share: Percentages entered from of K-1 Section J (All Ending fields 0%)

- Enter Your Liability Share: Amounts entered from K-1 Section K (All Ending fields $0)

- Enter Capital Account Information: Amounts entered from K-1 Section L (Ending capital account $0)

- Describe Partnership:

--- This is a publicly traded partnership. (checked box)

--- This partnership ended in 2021. (checked box)

- Describe Partnership Disposal: Complete disposition

- Tell Us About Your Sale: What type of disposition was this? - Sold Partnership Interest

- Enter Sales Dates

---Purchase Date: 09/08/2011

--- Sale Date: 11/22/2021 (I used this date since this was when my sale order was executed. 11/24/2022 is when the residual shares were sold).

Enter Sale Information: I am not sure what to enter into these fields.

Regular Gain or Loss	AMT Gain or Loss
Sale Price: __________
Selling Expense: __________
Partnership Basis: __________	Partnership Basis: __________
Ordinary Gain: __________	Ordinary Gain: __________
1250 Gain: __________	1250 Gain: __________

Describe the Partnership: All of my investment in this activity is at risk.

Any help that can be provided would be greatly appreciated! Thank you!

Mike9241

you see column 6 it's negative. this may mean you misreported in prior years. when tax basis goes negative that means net losses exceed your tax basis making them non-deductible or distributions exceeded your tax basis which would result in your needing to report a capital gain in the year it happened. or it could be a combination of losses and distributions that caused this. I'm going to ignore this unless you want to hire a pro to review prior reporting and file amended returns if need

for the k-1

need to indicate final

also need to indicate complete disposal

then you need to use the k-1 link to enter certain disposition information

most should be self-exlanatory

when you get to the sales price only enter the amount in column 7

cost = 0

ordinary income same as column 7

all this will flow to form 4797 line10 and be taxed as ordinary income

on the 1099-B you need to adjust the cost information. it's wrong because brokers do not get any info to enable them to adjust for the partnership activity

your sales price is the $2810

tax basis $3986 what you paid less $5069 what you got in income, losses and distributions plus the $2228 of ordinary income = $1145 resulting in LTCG $1665

total ordinary gain and capital gain (just an FYI) $2228 + $1665 = $3893

this is your sales proceeds $2810 plus basis adj of $5069 (net income and distributions) = $7879

less your original tax basis $3986 ($7879 less $3986 = $3893)

as you can see dealing with a PTP is a pita

what's worse about many PTPs is that the longer you hold them

the larger column 5 becomes and column 7 also increases by about the same amount.

had a client that held a PTP 10 years or so. ordinary losses for that period were about $10K which couldn't be deducted due to the passive loss rules for PTPs. when sold column 7 was $50K so net ordinary income in the year of sale was $40K which made more of social security taxable and had other adverse effects on the return.

chiefs19Author

Hello Mike9241,

I appreciate your response, but I am still struggling with this and what I need to enter. Obviously, getting into an MLP is way beyond my expertise and I should have just stayed with stocks.

In reading back through your first paragraph, I made my initial purchase on 9/28/2011 and a second purchase on 5/17/2012. I received distributions (dividends) quarterly up until 2/12/2016 that were always reinvested in new shares. This is the only sale that I have made and it was to liquidate the shares and get out of the MLP. I have owned shares in the MLP for a little over 11 years, which is 12 years too long in hindsight.

I have been using TT Premier every year to file my taxes based on the K-1 provided the company. I even had someone at TT audit my taxes the first year just to make sure I completed them properly. He found no issues and said everything looked great. I do not understand the negative amount in column 6 and how I could have misreported in prior years. The company was close to filing bankruptcy a few years ago, so it had a lot of losses. It changed CEO and CFO and then started on a course of recovery. Eventually the price went up enough for me to liquidate before then of 2021 to finally get out.

I checked the following buttons/boxes:

Limited Partner or Other LLC Member
Domestic Partner
This is a publicly traded partnership.
This partnership ended in 2021.
Complete disposition
Sold Partnership Interest

Enter Sales Dates:

Purchase Date: 09/08/2011

Sale Date: Would this be the date I initiated the sale (11/22/2021) or the date the residual shares were sold (11/24/2021)?

Regular Gain or Loss	AMT Gain or Loss
Sale Price: __________
Selling Expense: __________
Partnership Basis: __________	Partnership Basis: __________
Ordinary Gain: __________	Ordinary Gain: __________
1250 Gain: __________	1250 Gain: __________

I am still trying to figure out what to enter in these fields, especially considering that my 1099-Bs were downloaded from my brokerage firm.

From your response:

for the k-1

when you get to the sales price only enter the amount in column 7 (column 2,228)

cost = 0 (is this Purchase Price / Initial Basis Amount column 4?)

ordinary income same as column 7 (is this Ordinary Gain?)

all this will flow to form 4797 line10 and be taxed as ordinary income

- Is all of this entered under Regular Gain or Loss?

-What about AMT Gain or Loss?

I kind of follow what you state in your response regarding my 1099-B, but I do not know how to go about adjusting the 1099-B form in TT. This is my first sale of a MLP and I have never encountered any of this before.

I appreciate any help and guidance you can give me. Thank you!