Kinder Morgan Energy Partners L.P.

[TAG]

Kinder Morgan Energy Partners L.P. is a Publicly Traded Partnership that reorganized in 2014 which translates to a sale for owners of which I'm one.

In their K-1 packet of info is a "2014 Sales Worksheet" for Federal and State Tax returns.  It shows "adjustments to Tax Basis" of -26,093 ; "Ordinary Gain/Loss" of 19,853 gain; "AMT adj" of -1,603.

 

On my Scottrade brokerage statement in the 1099-B section it shows a gain of 19,068.64.

 

This seems to me to be a duplication of tax info.

 

Does anyone know how to handle this on the Federal Income Tax Return?

[Gail in Virginia]

I don't believe the sale information on the K-1 is reported to IRS - it is part of the supplemental statements.  I have been reporting them using the 1099B information, marking the k-1 final, and following the instructions ProSeries included in the disposition section of the k-1 as follows:

 

Note:  If this is a full or partial disposition of a publicly traded partnership (PTP) or master limited partnership (MLP) that was reported to you on a Form 1099-B, enter a sales price of zero on line 5 and a basis of zero on line 7 below.  Enter the 1099B transaction on Schedule D, checking the appropriate "Reported on 1099-B" box A or B.

[Lion EA]

And, make the adjustments to report ordinary income/loss and the other details in the sales worksheet from KM.  A royal pain.

[Catherine]

Yes, I have had several of these as well.  There is a worksheet they send, which gives those adjustments.  So take the proceeds and basis from the brokerage, apply the basis corrections, then adjust *again* to get the split between capital gain (or loss) and the 4797 sale of business assets piece that the worksheet gives you.

 

I have one here that I did yesterday; PM me for my phone number and I can walk you through it if you want hand-holding - but you *can* do this yourself.  It's just niggly and fussy rather than hard.

[TAG]

Thank you all.  Need much stronger glasses to be able to read the worksheet instructions.  I think I'll try to magnify it with my printer.

 

Thanks again.

 

Terry

[Abby Normal]

It's not a duplicate. It's just telling you to classify that much of the gain as ordinary gain over on 4797 Pt II. People with large cap loss c/o can hit with phantom income when selling MLPs.

 

Also, you should be freeing up PTP losses to be deducted on Sch E.

 

I've done a few Kinder Morgan's already.

 

I would never invest in one of these.

[need help]

I am working on a sale of Enterprise Products Partners and am having difficulty entering the ordinary income into 4794 part II

[JohnH]

I'm not in  them office for a few more days so can't look this up to confirm.  But it seems as though one of the energy MLP's I handled within the past couple of years had some odd adjustments to basis because it reported considerable COD income. (It might have been K-M). Anyhow it sure was a pain trying to explain THAT entry to a high net woth client. 

[SaraEA]

TAG, the Scottrade brokerage statement likely lists the sale under "basis not reported."  Whatever gain is reported is phantom.  You have to do the worksheets and then plug in the actual basis.  I'm doing a return right now where the guy sold at least a dozen PTPs.  UltraTax this year will calculate the ordinary income and cap gains portions when I enter the numbers from the PTP 1099B.  YEA!!!!  It used to take so much time to do this by hand and then double-check my math.  Now I'm concerned that these sales are all reported on the brokerage 1099s (four separate brokerages) and then again on 1099Bs from the PTPs.  Client didn't sell the shares twice.  If I enter the sales in the K-1 part of the program, which will generate 4797 entries, will they transfer to Sch D and duplicate what's already there?  I already had to do a spreadsheet for this guy to double-check all the entries from the brokerages for short-term, basis, reported, not reported etc.  This will throw everything way off.

Be prepared for your client to have a big gain, although maybe not as high as appears on the brokerage.  These things are designed to throw off losses, which catch up to the shareholders when they sell.  And John H, last year after the price of oil tanked some of these PTPs passed through huge amounts of CODI.  Why do people by these things?

[JohnH]

I think the main reasons people buy these things are because in the face of low interest rates they are chasing yield. They have no idea that the risk they are assuming is way out of proportion to the potential reward. They also don't understand that much the payout is not actual return on investment.

Finally, the main reason is the huge commission these products pay to financial advisors. If their advice was really valuable, this violation of trust wouldn't exist. After all, where are the customers' yachts? 

[jklcpa]

Sara, John, everyone -

TAG's original post is 2 years old(!) and was revived by a new member, and from the profile I can't tell if this person is a professional or member of the general public.  

[need help]

I have been using Proseries for the past 20 years and switched to ATX this year.  I am trying to enter the disposition of a publicly trade partnership.  I understand and have calculated the ordinary gain.  My question is do you enter the sale directly on form 4797 or is there a worksheet with the form K1 that transfers the ordinary gain to form 4797?  If there is a worksheet, how do you access it?

Thanks

[Richcpaman]

We had a different one to report... actually several.

We reported the info from the 1099B broker on the 8949, then a "back out" adjustment for the ordinary amount we reported on the 4797.

Simple, and gets the answer.

I do not know if ATX has another way to do it.

[Abby Normal]

1 hour ago, Richcpaman said:

We had a different one to report... actually several.

We reported the info from the 1099B broker on the 8949, then a "back out" adjustment for the ordinary amount we reported on the 4797.

Simple, and gets the answer.

I do not know if ATX has another way to do it.

If by 'back out adjustment' you mean using code B on the same line of the 8949 that shows the sale, then that is exactly the way we handle it. We used to put them on a separate line of the 8949 until we learned about the codes for adjustments.