Question

Total disposition of MMP shares (MLP)

Forum|Forum|2 years ago
March 16, 2024
1 reply
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So I have seen threads about this

in the past but none this year. My shares in MMP were bought out by another company. I received a K-1 for this. My brokerage also reported a basis and the proceeds on my 1099-B. So where do I put everything and not have it reported twice? Thank you for your help.

M

Mike9241

MLP and PTP reporting k-1 and 8949

See the sales schedule that was included with the k-1

Enter the k-1 info

Check the PTP box

If total disposition proceed as follows:

Check final K-1 (s/b marked on actual k-1)

Check sold or otherwise disposed of entire interest

On the k-1 disposition section for sales price use the ordinary income (sometimes you’ll see a column with the “751” or the words “Gain subject to recapture as ordinary income” or similar wording. This info comes from the supplemental sales schedule that should have been provided. It’s also now on the k-1 box 20AB -no such info then then sales price is zero. The numbers I’m using represent the line numbers in forms mode (desktop only)

Sales Price = line 20AB (1065 k1)
Selling expenses = 0
Basis = 0
Gain is computed and should be same as the sales price.
Ordinary gain = enter same as sales price

This amount flows to form 4797 line 10 and is taxed as ordinary income. This step is necessary, so any suspended passive losses are allowed.

10,11,12 should be blank

Now for the 8949.

The broker’s form is probably coded as B or E – sales proceeds but not cost basis reported to the IRS. This is because the broker does not know what your tax basis is. It used what you paid originally which is not correct.

The correct tax basis is:

What you paid originally, should be the same as what is on 1099-B as cost,

Then there is a column on the sales schedule that says cumulative adjustment to basis. If it’s positive add it to the original cost. If it’s negative subtract the amount.

Finally add the amount of ordinary income reported above, if any.

The result is your corrected cost basis for form 8949.

Some other things. Look at lines 20AB. That number should be added to the ordinary income above for reporting the 199A (qualified business income from the PTP). You don’t have to enter this but then you may lose out on the QBI/199A tax deduction.

D

Doug B1Author

Thank you so much for giving me step-by-step instructions. I felt baffled by how to avoid this transaction showing up twice. I will probably try your instructions tomorrow afternoon, I will post again if I run into problems. Much appreciated!!

D

Doug B1Author

I really do appreciate your help, but I am having problems. The ordinary gain did flow through to 4797 line 10, so that seemed to go correctly. Form 8949 does not allow edits, so I presume I need to adjust the basis on the 1099-B, correct?

Here are the numbers as reported on the sales schedule: initial basis/purchase price = $60,000

cumulative adjustment to basis = -$32,000

cost basis = $28,000 - is this what I need to report as my new basis on the 1099-B?

My sales schedule calls the $28,000 "my estimated outside basis (exclusive of liability allocations) in the disposed partnership interest. "

I am confused by your statement "add the amount of ordinary income reported above, if any." First, I'm assuming you mean "Gain Subject to Recapture as Ordinary Income" is the Ordinary Income you are describing? Second, add to what? This number was $32,000. Where do I add this?

Again, in my sales schedule, "Gain Subject to Recapture as Ordinary Income" = $32,000 and states "report this amount as a negative adjustment in column G of Form 8949 to calculate the correct capital gain or loss"

Boy, I will never buy a PTP again! Thank you for your help.