How do you report schedule k-1 on tax form?

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How do you report schedule k-1 on tax form?

Postby jneman » Sat Mar 19, 2011 10:02 pm

Hi,

I received a package from USO last night regarding Schedule K-1 (Form 1065), after filing my 2010 taxes about 3 weeks ago.

I bought and sold USO twice last year.

First time 1443 shares with total proceeds of $51433, Cost Basis of $50008 and gain of $1424. Aquired/Opened 8/11/10, Sold/Closed 8/13/10

Second time 1517 shares with total proceeds of $50384, cost basis of $49933, and gain of $451. Aquired/Opened 8/20/10, Sold/Closed 9/2/10

I already used the above to fill out my schedule-D, from my brokage 1099.

The Schedule-k1 that I received has the following information on line J:
Beginning Ending
Profit 0.0% 0.0%
Loss 0.0% 0.0%
Captital 0.0% 0.0%

Section L has the following information:
Beginning capital account 0
Capital contributed during the year 99,941
Current year increase (decrease) -12,269
Withdrawals & distrubutions 87,672
Ending captial account 0

Part III
Everything is blank with the exception of the following fields:
1) Ordinary business income (loss) -39
5) Interest income 2
6a) Ordinery dividents 3
11) Other income (loss) -12,235
19A) Distributions 0
20A) Other information 5

On 2010 Sales Schedule, There are the following:

Units Disposed 1443
Disposition Date 6/15/10
Cumulative Adjustment To Basis -7515
Ordinary Gain: 0
Alternative Minimum Tax Basis Adjustment 0

Unit Disposed 1517
Disposition 9/2/10
Cumulative Adjustment To Basis -4754
Ordinary Gain: 0
Alternative Minimum Tax Basis Adjustment 0

Partners Totals 0 under Ordinary Gain
Partners Totals 0 under Alternative Minimum Tax Basis Adjustment

I would really appreciate if you can answer my questions before I call my tax accountant:

1) What is "Cumulative Adjustment To Basis" and who determines this number ?
2) Is there a mistake in the "Cumulative Adjustment To Basis" ?
3) When I calculated my Capital Gain/Loss using the sales schedule, my captial came out to be $14144. Do I have to pay tax on this amount even though my total profit on buying and selling these shares was only $1875 ?
4) What do I need to do, now that I have already filed my taxes ?


Thank you.
jneman
 
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Postby pshonore » Sat Mar 19, 2011 11:29 pm

How to enter K1 items in a tax return is difficult to explain in this kind of a forum. Suffice to say the items in Box 1-11 have to be reported on your tax return. When figuring Capital Gain, you need to reduce your basis by the amount of the "cumulative adjustment to basis" as noted in the Sales Schedule. That was calculated by the Partnership (USO is structured as an LP) and represents items of income and loss that was passed through to the partners. Now that will dramatically increase your Capital Gain. and I suspect that the entry in Box 11C will "square things up" and probably offset the increased cap gains and get you back to where you think. Box 11C represents Section 1256 Contracts and Straddles and generally goes on Form 6781. I believe thats how USO accounts for their futures contracts. Might be time to call your tax accountant. This will definitely require an amended return.
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Postby jneman » Sun Mar 20, 2011 4:03 pm

Thank you for your information.
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Postby earlyout » Sun Mar 20, 2011 5:20 pm

It may not require a tax accountant. If you are familiar with filing amended returns and you used one of the tax preparation programs, the part of the program that deals with income likely includes a section for K1s. You can enter your information following the Q&A sequence.

The tax complexities with K1s is something to think about before investing in limited partnerships.

EO
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Postby MacBruins » Wed Mar 30, 2011 4:37 am

jneman,

My understanding is that the amount in Box 11 (-12,235) will offset the larger capital gain (14,144), so your tax probably will not go up. In fact, I see a scenario where it can go down. But to do things right, you'll need to file several more forms. If you don't want to see an accountant, at least use TurboTax. See below for the things I learned from IRS publications.

Also, I am not a tax pro, nor qualified to give tax advice, so please use your own judgment. If anyone finds errors, please share your insight. I'd love to learn the right way because I can't avoid K-1s for the moment.

I use TurboTax to prepare my returns. It's OK at handling K-1s. This year I wrote down what I did in a blog (first and only entry). The address is "macbruins dot blogspot dot com" (replace dot with "." I'm new here and not allowed links yet.)

The way I see it, "adjustment to basis" is how a partner avoids double taxation. When a partnership has income, a partner has to pay tax on his share, whether the income is distributed or not. When the partner sells his share of the partnership, IRS allows the partner to increase his cost basis by his share of income. This way, the income isn't taxed twice (first as income, again as capital gain). (Dividend distributed by a corporation is taxed twice: corporate tax and dividend tax.) On the other hand, when a partnership has a loss, adjustment to basis prevents a partner from claiming the same loss twice.

Here is how Box 11 items offset capital gain. For this discussion, I'll use my UNG K-1 as an example. My UNG K-1 has two losses: one Code C, one Code F. Code C means section 1256, so the loss is reported as capital loss (Schedule D), 40% short-term and 60% long-term. I am reporting the Code F loss on Schedule E, Part II, as non-passive loss because my K-1's supplemental info page says it is non-passive.

Back to your situation. Assuming only Codes C and F are reported in Box 11 of your K-1. Your Code C loss goes on Schedule D and offsets some of your large capital gain right away. Your Code F loss ends up on 1040 through Schedule E, and offsets more of your capital gain.

Here is a situation where you pay less tax.

Let's assume that without USO you have a loss of $7,000 from your other investments. Let's further assume your USO Code C loss is $8,000, and Code F loss is $4,235. You also have W-2 income of $50,000, and no other income.

If for USO you report capital gain of only $1875, you will have a loss of $5,125 ($1875 - $7000 = -$5,125) on Schedule D, out of which $2,125 will be carried to next year because only $3,000 is allowed per year. This makes your taxable income $47,000 ($50,000 - $3000).

But if you do things the hard way and report capital gains of $14,144, your Schedule D loss will be only $856 ($14144 - $8000 - $7000 = -$856). On Schedule E and Form 1040 you will report Code F loss $4,235. This lowers your taxable income to $44,909 ($50,000 - $856 - $4235).
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Postby pshonore » Wed Mar 30, 2011 11:43 am

MacBruins wrote:jneman,

My understanding is that the amount in Box 11 (-12,235) will offset the larger capital gain (14,144), so your tax probably will not go up. In fact, I see a scenario where it can go down. But to do things right, you'll need to file several more forms. If you don't want to see an accountant, at least use TurboTax. See below for the things I learned from IRS publications.

Also, I am not a tax pro, nor qualified to give tax advice, so please use your own judgment. If anyone finds errors, please share your insight. I'd love to learn the right way because I can't avoid K-1s for the moment.

I use TurboTax to prepare my returns. It's OK at handling K-1s. This year I wrote down what I did in a blog (first and only entry). The address is "macbruins dot blogspot dot com" (replace dot with "." I'm new here and not allowed links yet.)

The way I see it, "adjustment to basis" is how a partner avoids double taxation. When a partnership has income, a partner has to pay tax on his share, whether the income is distributed or not. When the partner sells his share of the partnership, IRS allows the partner to increase his cost basis by his share of income. This way, the income isn't taxed twice (first as income, again as capital gain). (Dividend distributed by a corporation is taxed twice: corporate tax and dividend tax.) On the other hand, when a partnership has a loss, adjustment to basis prevents a partner from claiming the same loss twice.
Adjustment to basis usually represents all items of income and expense passed through by the partnership. A lot of LPs have distributions which usually reduce your basis. The Commodity LPs (USO, UNG,et ) don't generally make distributions so that's not a factor.

Here is how Box 11 items offset capital gain. For this discussion, I'll use my UNG K-1 as an example. My UNG K-1 has two losses: one Code C, one Code F. Code C means section 1256, so the loss is reported as capital loss (Schedule D), 40% short-term and 60% long-term. I am reporting the Code F loss on Schedule E, Part II, as non-passive loss because my K-1's supplemental info page says it is non-passive.

Back to your situation. Assuming only Codes C and F are reported in Box 11 of your K-1. Your Code C loss goes on Schedule D and offsets some of your large capital gain right away. Your Code F loss ends up on 1040 through Schedule E, and offsets more of your capital gain.

Here is a situation where you pay less tax.

Let's assume that without USO you have a loss of $7,000 from your other investments. Let's further assume your USO Code C loss is $8,000, and Code F loss is $4,235. You also have W-2 income of $50,000, and no other income.

If for USO you report capital gain of only $1875, you will have a loss of $5,125 ($1875 - $7000 = -$5,125) on Schedule D, out of which $2,125 will be carried to next year because only $3,000 is allowed per year. This makes your taxable income $47,000 ($50,000 - $3000).

But if you do things the hard way and report capital gains of $14,144, your Schedule D loss will be only $856 ($14144 - $8000 - $7000 = -$856). On Schedule E and Form 1040 you will report Code F loss $4,235. This lowers your taxable income to $44,909 ($50,000 - $856 - $4235).
I don't believe you have that choice; the correct way (the hard way) is to adjust your basis by the stated number. Turbo Tax will usually make the right entries if you input the K1, and if you tell it you did a complete disposition of your interest and input the numbers from the Sales Schedule.
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Postby MacBruins » Wed Mar 30, 2011 4:08 pm

pshonore wrote:Adjustment to basis usually represents all items of income and expense passed through by the partnership. A lot of LPs have distributions which usually reduce your basis. The Commodity LPs (USO, UNG,et ) don't generally make distributions so that's not a factor.


Do you mean to say there are profitable partnerships that regularly distribute more expenses than income/gain? That would be really nice. A partner can get a tax advantage by deducting expenses yearly and turning income/gain into long-term capital gain.

My experience with partnerships is limited to a few public and private ones that invest in commodities and currencies. As you pointed out, UNG and USO don't report expenses on K-1s, just incomes and gains. The private ones do report expenses as code W in box 13, but usually small compared to income or gain.

pshonore wrote:I don't believe you have that choice; the correct way (the hard way) is to adjust your basis by the stated number. Turbo Tax will usually make the right entries if you input the K1, and if you tell it you did a complete disposition of your interest and input the numbers from the Sales Schedule.


You're correct. Neither TurboTax nor IRS offers a choice on the reporting of K-1. I meant to respond to his/her question of what to do since he/she already filed using the wrong/easy method. I wanted to show that the correct/hard way can possibly save some money, so an amended return is worth considering. Sorry I wasn't clear.
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Postby pshonore » Wed Mar 30, 2011 7:25 pm

I should have been more precise. Most of the partnerships I'm familiar with are publicly traded MLPs (pipelines, midstream gas processors, E&Ps, terminal operators, etc). They make distributions from free cash flow which are tax deferred as long as your basis exceed zero. They also pass through operating earnings/losses and some pass through expenses such as depletion and intangible drilling costs. Because of passive loss limitation rules, you cannot have a net loss but must carryover any net losses for use against future operating income or to be used when you dispose of your interest. The distributions lower your basis and when you sell, some of that MAY get recaptured as Ordinary Gain with the rest being Capital Gain. There have been a few threads in past few weeks about this.
There is also some good primer material available at http://naptp.org/Navigation/PTP101/PTP101_Main.htm .
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Postby MacBruins » Fri Apr 01, 2011 8:42 pm

pshonore,

Awesome! Thank you for the link. I heard MLPs are great for investing in natural gas, but I haven't learned enough about them to get involved. One more tool for the toolbox.

pshonore wrote:I should have been more precise. Most of the partnerships I'm familiar with are publicly traded MLPs (pipelines, midstream gas processors, E&Ps, terminal operators, etc). They make distributions from free cash flow which are tax deferred as long as your basis exceed zero. They also pass through operating earnings/losses and some pass through expenses such as depletion and intangible drilling costs. Because of passive loss limitation rules, you cannot have a net loss but must carryover any net losses for use against future operating income or to be used when you dispose of your interest. The distributions lower your basis and when you sell, some of that MAY get recaptured as Ordinary Gain with the rest being Capital Gain. There have been a few threads in past few weeks about this.
There is also some good primer material available at ...
(Had to change the quote because I am not allowed to post links. Sorry)
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Postby uso_bogled » Tue Apr 05, 2011 1:02 pm

pshonore wrote:How to enter K1 items in a tax return is difficult to explain in this kind of a forum. Suffice to say the items in Box 1-11 have to be reported on your tax return. When figuring Capital Gain, you need to reduce your basis by the amount of the "cumulative adjustment to basis" as noted in the Sales Schedule. That was calculated by the Partnership (USO is structured as an LP) and represents items of income and loss that was passed through to the partners. Now that will dramatically increase your Capital Gain. and I suspect that the entry in Box 11C will "square things up" and probably offset the increased cap gains and get you back to where you think. Box 11C represents Section 1256 Contracts and Straddles and generally goes on Form 6781. I believe thats how USO accounts for their futures contracts. Might be time to call your tax accountant. This will definitely require an amended return.


The USO folks have a website that will create a .txf file for your K-1 at:
google: taxpackagesupport unitedstatescommodityfunds
That file can be imported into turbotax so you don't have to enter the K-1 items.

Then, I think I also need to record the gain/loss of my USO transaction in Schedule D, just like I do with any stock sale.
But, from pshonore's advice and unlike normal stock sales, it sounds like I should adjust my basis for the Schedule D transaction by some of the amounts in the K-1.
This is consistent with the USO faq at:
google: unitedstatesoilfund uso-k1
Your tax basis is generally the original amount paid for the units adjusted as follows: ...

How do I do that Schedule D adjustment?
It seems like I don't just add or subtract that amount to my basis.
Rather, it seems like the tax forms guide me though it:
My K-1 adjustment is reported on form 6781.
f6781 lines 8 and 9 split the adjustment into long and short term
and instruct me on incorporating these values into Sch D in a different place than where I report my USO sale.
Thus, for reporting the sale of USO in schedule D, I just report it like I do with any stock sale and don't do any adjustments to the basis because the adjustments are reported in other places and then moved to Sch D.

This is how it seems to work -- it that correct?
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Postby MacBruins » Tue Apr 05, 2011 1:33 pm

uso_bogled wrote:The USO folks have a website that will create a .txf file for your K-1 at:
google: taxpackagesupport unitedstatescommodityfunds
That file can be imported into turbotax so you don't have to enter the K-1 items.

Then, I think I also need to record the gain/loss of my USO transaction in Schedule D, just like I do with any stock sale.
But, from pshonore's advice and unlike normal stock sales, it sounds like I should adjust my basis for the Schedule D transaction by some of the amounts in the K-1.
This is consistent with the USO faq at:
google: unitedstatesoilfund uso-k1
Your tax basis is generally the original amount paid for the units adjusted as follows: ...

How do I do that Schedule D adjustment?
It seems like I don't just add or subtract that amount to my basis.
Rather, it seems like the tax forms guide me though it:
My K-1 adjustment is reported on form 6781.
f6781 lines 8 and 9 split the adjustment into long and short term
and instruct me on incorporating these values into Sch D in a different place than where I report my USO sale.
Thus, for reporting the sale of USO in schedule D, I just report it like I do with any stock sale and don't do any adjustments to the basis because the adjustments are reported in other places and then moved to Sch D.

This is how it seems to work -- it that correct?


If you import the .txf file into TurboTax, is it still necessary to do enter items on Schedule D yourself? Maybe TurboTax will do it for you.

I did not import my UNG K-1. I used TurboTax's interview flow. When I finished, TurboTax did everything automatically, including entering data on Schedule D. I only had to calculate the adjust basis.
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Postby pshonore » Tue Apr 05, 2011 1:41 pm

I'm not giving tax advice, but I don't think that is correct. USO most likely furnished a Sales Schedule that showed a "cumulative adjustment to basis". That gets added to your original cost. Be careful because if the adjustment is negative (usual case), it will reduce your basis, therby increasing your gain. Use that reduced basis as the "cost" on Schedule D for the line reflecting your sale of USO. I do not think the tax forms will guide you through the process but the instructions on the Sales Scheule will. I'm looking at an old UNG K1/Sale Schedule and that seems to be the case

Form 6781 takes care of profits/losses from the USO trading activities, but not from the sale of your interest.

Be careful when using .txf files. They do not always contain all the data on the K1.
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Postby uso_bogled » Wed Apr 06, 2011 2:00 am

pshonore wrote:I'm not giving tax advice, but I don't think that is correct. USO most likely furnished a Sales Schedule that showed a "cumulative adjustment to basis". That gets added to your original cost. Be careful because if the adjustment is negative (usual case), it will reduce your basis, therby increasing your gain. Use that reduced basis as the "cost" on Schedule D for the line reflecting your sale of USO. I do not think the tax forms will guide you through the process but the instructions on the Sales Scheule will. I'm looking at an old UNG K1/Sale Schedule and that seems to be the case


thanks for your reply!
ok, i looked more closely at my K-1 and associated docs from USO.
I see the "cumulative adjustment to basis" and the "2010 Sales Schedule" with instructions on entering the info.

i added up my "cumulative adjustment to basis" which is all negative numbers and it comes to about -1400.
being the savvy investor that i am, i also have a loss of -1000 which is the difference between my sell and buy amount.
i don't think i should reduce my basis by 1400 (which would give me an overall gain).

actually, what happened is i bought uso and held it for awhile.
the price of oil went down then back to about what i bought it at.
but my uso price did not go back -- lost 1000 and i suspect i also lost 1400 from "contango" - this is loss that the partnership did for me.
so my loss is actually 2400.
if i use the method that i described above, i actually get a loss of 2400 on my tax return (some of split into long and short term).
this also corresponds to what happened in real life: i lost money (2400) even though the price of oil was the same at buy and sell time.
so, my "approach" is different from pshonore's.
i'd like to "do the right thing" but i'm not sure what that is.
i'll stick to this until someone enlightens me.

ps: in my previous post, i use things like:
google: taxpackagesupport unitedstatescommodityfunds
because this forum won't allow me to type in urls, so use google to search for the web pages i refer to.
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Postby MacBruins » Wed Apr 06, 2011 4:30 am

uso_bogled wrote:
thanks for your reply!
ok, i looked more closely at my K-1 and associated docs from USO.
I see the "cumulative adjustment to basis" and the "2010 Sales Schedule" with instructions on entering the info.

i added up my "cumulative adjustment to basis" which is all negative numbers and it comes to about -1400.
being the savvy investor that i am, i also have a loss of -1000 which is the difference between my sell and buy amount.
i don't think i should reduce my basis by 1400 (which would give me an overall gain).

actually, what happened is i bought uso and held it for awhile.
the price of oil went down then back to about what i bought it at.
but my uso price did not go back -- lost 1000 and i suspect i also lost 1400 from "contango" - this is loss that the partnership did for me.
so my loss is actually 2400.
if i use the method that i described above, i actually get a loss of 2400 on my tax return (some of split into long and short term).
this also corresponds to what happened in real life: i lost money (2400) even though the price of oil was the same at buy and sell time.
so, my "approach" is different from pshonore's.
i'd like to "do the right thing" but i'm not sure what that is.
i'll stick to this until someone enlightens me.

ps: in my previous post, i use things like:
google: taxpackagesupport unitedstatescommodityfunds
because this forum won't allow me to type in urls, so use google to search for the web pages i refer to.


uso_bogled,

A question: You sold your USO shares for $1,000 less than what you paid, right? If so, your net loss is just $1000, not $2400.

What pshonore described is the right thing to do. There isn't much ambiguity on the method to calculate cost basis.

The "cumulative adjustment to basis" numbers are sums of income and losses. Items that contribute to adjustments (-1400 in your case) appear on your K-1 and should to be reported separately. For example, Code C in Box 11 goes to Form 6781, and Code F goes to Schedule E, Part II. Interest income goes to Schedule B.

Because they are reported separately, IRS wants to exclude these items from capital gain/loss calculation, thus the "cumulative adjustment to basis" numbers. In your case, the adjustments give you a gain on your sale,

But ultimately items on K-1 will offset this gain, and give you a net loss $1000.
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Postby uso_bogled » Wed Apr 06, 2011 9:14 am

MacBruins,

Thanks for your reply!
i plugged my k-1 file into a sample turbotax return and found that it does (in the ideal case), subtract 1400 in capital gains.
This plus the USO K-1 FAQ have convinced me that I should decrease my basis by 1400 as you recommend and then the k-1 should compensate for the basis adjustment (in the ideal case anyway).
This way i will only have the 1000 loss instead of the 2400 loss.
It's quite amazing that i have to make this kind of adjustment to my basis!

btw, here's another thread that also adjusts the basis:
google: optionetics uso 6781
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Postby pshonore » Wed Apr 06, 2011 9:31 am

When in doubt, follow the instructions supplied by the MLP. They are quite clear. Unfortunately a lot of people invest in these Commodity ETFs and have no idea of the tax implications. Message boards start sprouting tons of questions when the dreaded K1 arrives.
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Postby porcupine » Wed Apr 06, 2011 10:21 am

MacBruins wrote:jneman,

My understanding is that the amount in Box 11 (-12,235) will offset the larger capital gain (14,144), so your tax probably will not go up. In fact, I see a scenario where it can go down. But to do things right, you'll need to file several more forms. If you don't want to see an accountant, at least use TurboTax. See below for the things I learned from IRS publications.

Also, I am not a tax pro, nor qualified to give tax advice, so please use your own judgment. If anyone finds errors, please share your insight. I'd love to learn the right way because I can't avoid K-1s for the moment.

I use TurboTax to prepare my returns. It's OK at handling K-1s. This year I wrote down what I did in a blog (first and only entry). The address is "macbruins dot blogspot dot com" (replace dot with "." I'm new here and not allowed links yet.)

The way I see it, "adjustment to basis" is how a partner avoids double taxation. When a partnership has income, a partner has to pay tax on his share, whether the income is distributed or not. When the partner sells his share of the partnership, IRS allows the partner to increase his cost basis by his share of income. This way, the income isn't taxed twice (first as income, again as capital gain). (Dividend distributed by a corporation is taxed twice: corporate tax and dividend tax.) On the other hand, when a partnership has a loss, adjustment to basis prevents a partner from claiming the same loss twice.

Here is how Box 11 items offset capital gain. For this discussion, I'll use my UNG K-1 as an example. My UNG K-1 has two losses: one Code C, one Code F. Code C means section 1256, so the loss is reported as capital loss (Schedule D), 40% short-term and 60% long-term. I am reporting the Code F loss on Schedule E, Part II, as non-passive loss because my K-1's supplemental info page says it is non-passive.

Back to your situation. Assuming only Codes C and F are reported in Box 11 of your K-1. Your Code C loss goes on Schedule D and offsets some of your large capital gain right away. Your Code F loss ends up on 1040 through Schedule E, and offsets more of your capital gain.

Here is a situation where you pay less tax.

Let's assume that without USO you have a loss of $7,000 from your other investments. Let's further assume your USO Code C loss is $8,000, and Code F loss is $4,235. You also have W-2 income of $50,000, and no other income.

If for USO you report capital gain of only $1875, you will have a loss of $5,125 ($1875 - $7000 = -$5,125) on Schedule D, out of which $2,125 will be carried to next year because only $3,000 is allowed per year. This makes your taxable income $47,000 ($50,000 - $3000).

But if you do things the hard way and report capital gains of $14,144, your Schedule D loss will be only $856 ($14144 - $8000 - $7000 = -$856). On Schedule E and Form 1040 you will report Code F loss $4,235. This lowers your taxable income to $44,909 ($50,000 - $856 - $4235).

OP:

Thanks for bringing up this issue. I had used TaxAct last year and, though I did not overpay taxes either for 2009 or 2010, I will likely have a larger loss carryover once I re-do my taxes - urghh!

I don't think it was TaxAct's fault - I had done the Schedule D by myself, and then done the K-1 related entries based on TaxAct logic!

MacBruins:

Thanks for your response. I will note down your points and see what/how I need to amend my returns.

- Porcupine
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Postby Uninvested » Wed Apr 06, 2011 11:03 am

Strong suggestion. Never do anything that involves a K1. They always come late and often change. They are pains to deal with.
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Postby pshonore » Wed Apr 06, 2011 11:04 am

One more point on MLPs - when you sell a conventional MLP like a pipeline, terminal operator, gas processor, etc, some of that Capital Gain gets reclassified as Ordinary Gain because of recapture of depreciation. (This is generaly not true of the Commodity ETFs that report on a K-1 since they have no "business operations" but are engaged in futures trading). That Ordinary gain cannot be offset by Capital Losses or carryovers (other than up to $3K which can be used to offset any income)
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Postby MacBruins » Wed Apr 06, 2011 1:17 pm

pshonore wrote:One more point on MLPs - when you sell a conventional MLP like a pipeline, terminal operator, gas processor, etc, some of that Capital Gain gets reclassified as Ordinary Gain because of recapture of depreciation. (This is generaly not true of the Commodity ETFs that report on a K-1 since they have no "business operations" but are engaged in futures trading). That Ordinary gain cannot be offset by Capital Losses or carryovers (other than up to $3K which can be used to offset any income)


pshonore,

Another great tip! Thanks!

Just one question for you: You mentioned there were a few threads about MLPs in the past few weeks. Do you recall any keywords I can google? I want to learn more about them.

You're very knowledgeable about MLPs. Do you have a blog to share your wisdom? (OK, two questions. :-))
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Re: How do you report schedule k-1 on tax form?

Postby upL8N8 » Fri Apr 12, 2013 10:13 am

This is an old topic, but is there ever a case where the values on the k-1 do not offset the cumulative adjustments to cost basis?

Between the buy and sale of stock (ProShares Ultrashort Oil (SCO) if it matters, multiple trades), I lost approximately $2k over a year. On my sales schedule, my total cumulative adjustments were -2500. After adjusting the cost basis down, I am now supposedly making $500 on this partnership. Normally this -$2500 would be offset by the values on the K-1, but the K-1 has the following values:

Box 5: 2 (Interest Income)
Box 8: 911 (Net short-term capital gain (loss)
Box 11: C -72 (Other income (loss))
Box 13: K 57 (Other Deductions)

Overall, all of my stock trades broke even for the year. However, when I enter this K-1, my federal tax rebate shrinks. I don't remember exactly how much off hand. When I then enter the adjusted cost basis , my federal tax rebate shrinks substantially.

So instead of breaking even on my stock trades and not paying any taxes on these trades, I am now paying taxes on what seems to be $911 +/- the other values on the K-1, as well as on $2500 for the cost basis adjustments.

Needless to say, I'm a little confused at what happened here, and why I'm paying so much tax on this trade that I lost money on...

For the record, I also traded UCO (Proshares Ultra) and the K-1 and cumulative adjustments seemed to offset (or at least get pretty close).

If anyone could clear this up, and ensure I'm entering everything correctly, I'd appreciate it! Thanks!
upL8N8
 
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