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USO ETF Partnership K-1

Forum|Forum|6 years ago
June 3, 2019
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I purchased USO ETF and got K-1. Even I did not get any income, interests or dividends, on K-1 those boxes have some positive amounts. Now I had sold everything for this USO ETF and transaction appears on 1099. My understanding is I have to pay tax for those "income" (even I never get them). My questions are why K-1 boxes show those positive amount (it indicates my "income" or something else) ? Should I pay tax on those void income? How do I handle this on my tax return?

Thank you very much for your advice!

TurboTax Premier Windows

Best answer by nexchap

Your taxes will balance out. Here's how:

- As a partner, you have to pay any taxes the partnership owes. So if the partnership receives $10 in INT, you owe taxes on it even if they didn't send you the $10. You pay this in Turbotax by entering the K-1 into the program, and it takes care of moving everything to the correct spots.

- However, when you sell your share of the partnership, your profit on the sale is different for a partnership. With regular stock, your profit would be [sales price] - [purchase price]. But with a partnership, your profit is [sales price] - [purchase price] - [all the stuff the partnership made you pay taxes on]. So if you paid taxes on $10 in INT, you're 1099-B profit would be $10 less.

To do this, you'll have to adjust the cost of your purchase on the 1099. Your K-1 from USO should have included a Sales Schedule showing instructions on how much to adjust it by.

N

nexchapAnswer

Your taxes will balance out. Here's how:

- As a partner, you have to pay any taxes the partnership owes. So if the partnership receives $10 in INT, you owe taxes on it even if they didn't send you the $10. You pay this in Turbotax by entering the K-1 into the program, and it takes care of moving everything to the correct spots.

- However, when you sell your share of the partnership, your profit on the sale is different for a partnership. With regular stock, your profit would be [sales price] - [purchase price]. But with a partnership, your profit is [sales price] - [purchase price] - [all the stuff the partnership made you pay taxes on]. So if you paid taxes on $10 in INT, you're 1099-B profit would be $10 less.

To do this, you'll have to adjust the cost of your purchase on the 1099. Your K-1 from USO should have included a Sales Schedule showing instructions on how much to adjust it by.

**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!

L

LearnerAuthor

Thanks a lot for your answer. I have USO Sales Schedule and I found (negative) numbers corresponding each purchase I had, under Cumulative Adjustments To Basis. And for Ordinary Gain and Alternative Minimum Tax Basis Adjustment are 0s. Do the those mean I have nothing can adjust? Or if I can, I believe I should, how to enter those into TurboTax as [all the stuff the partnership made you pay taxes on]? In Sales Schedule it mentioned Form 8949, but did not tell how to do it. Can you help me out further? Really appreciated!

P

PowerTaxer

Hi @nexchap

I was adjusting the cost basis of 1099-B based on the cumulative adjustment in K-1. In my case, the cumulative adjustment is negative so I corrected my 1099-B as below.

K-1 (from USO)

	Amount ($)
Purchase price	2000
Cumulative Adjustment	-500
Cost basis	1500

Original 1099-B (from Robinhood)

	8949 (Box A)	8949 (Box C)
Cost basis	1950	52
Sale proceeds	1650	42
Income (loss)	-300	-10

Amended 1099-B (Edited in TurboTax)

	8949 (Box A)	8949 (Box C)
Cost basis	1950	52
Sale proceeds	1650	542 (=42+500)
Income (loss)	-300	490 (=-10+500)

I updated the number in the sale proceeds of Box C. Is this correct? (Q1) I did this because the cost basis of box A has been reported to IRS. (Q2) Also, I updated sales proceeds instead of cost basis because K-1 indicates negative cumulative adjustment.

Thanks a lot in advance!!

N

nexchap

@PowerTaxer Doing it that way reports the correct Cap Gain in total, but I'm not sure that changing the Sales Proceeds number is the best way to do it. I say this strictly because I'm not expert enough to know whether the tax code uses your total proceeds in any other ways than Sched D.

Personally, I'd be more comfortable correcting the basis Robinhood supplied to the IRS (changing the 1950 to 1450). That's completely allowed, and if the IRS ever asks for an explanation you can just say "Robinhood doesn't understand the stuff they broker...." and then maybe add the bit about K-1 basis adjustments.

**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!

P

PowerTaxer

@nexchap I appreciate your prompt comment! I didn't know if it is ok to change the cost basis reported as box A!

I have one follow-up question. In the process of writing a 1099-B item in TT, I found that there is a pop-up like the below capture. Given I have adjusted the cost basis of this item, should I check "The cost basis on my statement is incorrect"? or just leave it not checked.

S

Sue45

Help please, please ! I am not sure am I understand it correctly or not.
For my sale of the share, on my K-1, purchase price /initial basis amount: $200, cumulative adjustments to basis: $180, cost basic: $380.

on my 1099B: 1d-proceeds&6-reported Gross: $450, cost or other basis: $250, Gain or loss: $200.

so the real cost basis is purchased price $200+ cumulative adjustment $180 = $380? And I should replace the cost basis $250 at the 1099B with $380?
And my real gain is: sale price $450 — purchase price $200 — cumulative adjustment $180 = $70. And I should adjust the 1099B also?

N

nexchap

@Sue45 Based on the numbers you included, you've got it right. Cost of 380 and gain of 70. As a double check, looking at it more practically, you paid $200 originally and sold for $450. So you had a profit of $250. Over the time you owned the partnership, you should have paid tax on that $250. So the $70 showing up on this year's 1099-B is only part of the picture, and suggests that the partnership reported $180 in income over the years that you already paid tax on.

**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!

S

Sue45

Now I understand the cumulative adjustments to basis better. Even I didn’t sell the shares last year, but there was gain value, and I had to pay tax for that. So, that $180 actually is gain adjustment because I paid tax last year already. So now I suppose just owe tax for the part that I never had paid tax before.
Now, I just need to adjust my 1099B, right? I finished input my K-1 in TT, didn’t ask me about sale price or purchase price.

by the way, thank you so much for the reply! I read all your reply and learned so a lot! You definitely save my day, THANK YOU!