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Subject:  Taxation of MLP Unit Sales Date:  3/6/2013  8:01 PM
Author:  raleigh1208 Number:  117970 of 130713

In going through my investment sale transactions and taxation, I import monthly my transactions from my brokerage accounts at Interactive Brokers into Gainskeeper in order to prepare my Schedule D and related schedules. Then at tax time I import the information from Gainskeeper into TaxAct online. The only kink in the armor in the recorded sale transactions relate to MLP unit sales. I have to go back and adjust those when the K-1s come in for my MLPs and adjust for any sold MLP units. This relates to my question for you.

As part of the Schedule K-1 information when you sell MLP units is a Sales Worksheet where the MLP has given information to be used to calculate gain or loss from the disposition of the MLP units during the year. You have to enter on the Worksheet your sale proceeds and original purchase price, and then the MLP gives you adjustments to your tax basis, and amounts of ordinary gain to be entered on Form 4797, Part 11, line 10, and from that the difference is your actual capital gain or loss to be reported on your Schedule D of 1040. The Worksheet also gives you an AMT adjustment to enter on Form 6251, Line 17.

My questions, first: do you just work through this Worksheet and then enter the amount of Ordinary Gain on Form 4797 and the resulting Capital Gain/Loss on your Schedule D, and AMT adjustment on 6251, as indicated on the Worksheet? Anything else outside of the Worksheet you should be deducting from the Worksheet numbers?

Second--how do you go about the separate entry of additional Ordinary Gain on Form 4797 for this unit sale?

Finally, one of the Worksheets I got said to the effect that "if you have disposed of all of your MLP units in 2012, you will also be able to recognize your prior year(s) cumulative suspended MLP passive losses, if any, in the current year." Where do you find all these cumulative suspended passive losses? Once you know that amount of losses, where do you recognize these losses? Do you offset them against the amount of Ordinary Gain from the Worksheet? Or will they be deducted when you enter all the other numbers from the MLP into your tax program for the year? I believe I remember a question in the tax program asking if you sold all your units during the year.

Thanks as usual for all your help!

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