Steps in Turbotax Deluxe to report a PTP sale correctly for the Sales Worksheet and K-1

Forum|Forum|3 years ago
April 1, 2023
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I have a sale from a PTP. In the sales worksheet of the K-1, there is a value in column 7, Gain Subject to Recapture as Ordinary Income. This value is supposed to be entered on Form 4797 Part II Line 10. However, nothing is in Part II. The total amount, $4321, is the same as the K-1s box 20AB, Section 751 Gain, totaled from 3 separate passive activities within the Energy Transfer Partnership. I cannot fill in the Form 4797 manually and I obviously haven't done something right to enter the information accurately. Where should the information come from or be entered to fill it in properly using TurboTax Deluxe?

The K-1 instructions for column 7 say "Column 7: The instructions to Form 8949 are unclear in the determination of capital gain where total gain on the sale of units is partially ordinary gain. Reporting this amount as a negative adjustment in Column G of Form 8949 should generally result in the correct capital gain or loss. The amount reported as ordinary gain is qualified PTP income for Section 199A and has not been included in the amount reported on Schedule K-1, Line 20Z. If you have ordinary gain, a Section 751 Statement (refer to the Individualized Income Tax Reporting Package & Instructions) must be attached to your return."

I understand this amount, $4321, is also 199A income, even though it is not a K-1 box 20Z value. When I called the partnership I was told only to use box 20Z for 199A income (they did not include a Statement A). $4321 is the same value as box 20 AB, Section 751 Gain, which I did enter as I went through the K-1 interview. Actually, there are 3 separate passive activities so the total of the 3 20 ABs is $4321. However, at the interview screen called "We need some information about your 199A income", I have only entered the 20Z Section 199A PTP Income (actually loss). Do I add this Section 751 Gain at this screen, maybe under the Total ordinary 4797 gain/loss included above?? Once Form 4797 does have a Part II value, would this belong in the 199A income?

Are there other adjustments that I need to make in the Deluxe version that do not automatically get handled by TurboTax for the sale of PTP units, or the entry of K-1 boxes?

nexchap

There's a screen during the interview that asks you about the sale of the MLP ("Enter Sale Information"). There are rows for sale price, selling expense, basis, and Ordinary Gain. The Ordinary Gain row is where you enter the "Gain Subject to Recapture". TT will then transfer it to Form 4797.

Note, you have to set Sale Price and Selling Expense to $0, and set the Basis to the inverse of whatever you enter for Ordinary Gain (e.g., if you have $43 for 'Regular', and $40 for AMT, you'd enter -43 and -40 for basis). You do this to prevent TT from calculating any Cap Gain or Loss for this K-1.

You report the Cap Gain by adjusting the cost that came to you on the 1099-B from your broker. The correct cost will be the adjusted cost shown on your Sales Schedule + the Ord 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!

taxquestions44Author

Where is this screen in the interview? It is not under the K-1 entry. Would it be in the 1099-B entry? These are the fields for a single sale entry on the 1099-B interview.

nexchap

@taxquestions44 When you start the K-1 interview, there's a "Describe the Partnership" screen. Since you sold some of your partnership, check the box for "Disposed of a portion of my interest..." On the next screen ("Tell us about your sale") you'd check "Sold Partnership Interest". That will prompt TT to ask the K-1 sales questions.

**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!