Gain on excess distribution from Partnership

[joanmcq]

Client (who I am thinking about firing) is investing in PTPs, just in the last few years.  If he is recognizing gain on excess distributions, is the character ST or LT or does it depend on how long he has had the investment?

[jklcpa]

7 minutes ago, joanmcq said:

ST or LT or does it depend on how long he has had the investment

Yes, this is correct. It depends on how long the investment has been held.

[joanmcq]

Thank you!  I haven't had to calculate excess gain for about 23 years.

[Abby Normal]

I saw a note in ATX that they now track basis for PTP K1s, which is nice I suppose, but the K1 always includes supplemental pages when units are sold, to show the cumulative decreases in basis, and the amount of ordinary income for you, so I doubt I'd ever bother with that.

I had one yesterday where units were transferred to a new account, and the K1 included all the info as if the units were sold. I checked the 1099B and the K1 was not listed as a sale, so I ignored those pages, but I worry what will happen with those amount when the investment is sold. If those amounts should have transferred with the units in the new account, then it may be lost. I allocated some carryover losses to the new account because I thought that made sense.

Sometimes, you just can't worry about tracking all this nonsense.

[joanmcq]

I hate it when the K1 sale is on the 1099-B.  The basis is NEVER correct.

[joanmcq]

These guys have 90-100k invested in each PTP.  And these things are frikkin complicated!!  So I'm making sure I'm doing it all right.

[Abby Normal]

19 hours ago, joanmcq said:

I hate it when the K1 sale is on the 1099-B.  The basis is NEVER correct.

I don't, because then you just use the adjustment column with the appropriate codes, usually BO and combine the two adjustments, basis and ordinary income, and enter the net amount in the adjustment column. Easy peasy. I don't even break out the K1 sale to a separate line. I just leave it in the totals for that category (A, D, E, etc.). If that line already has an M for a code or an MW, the the code you end up with is BMOW, because they must be enter alphabetically for some reason.

THEN, go to 4797 and enter the ordinary income in section II, using the Input tab. There a drop down box to select the K1 the income relates to.

The ones that are easy to miss are when there is only a partial distribution of a K1 investment, because the K1 is not marked final.

You're also supposed to attach a 751 election to the return, but I sometimes skip that part, even though I have an election boilerplate in my Blank Elections tab.