PTP basis worksheet?

[ADK2ATX]

Hi all,

A client has a K-1 showing that he is a Limited Partner in a Publicly Traded Partnership.

What I think that I want to do is populate the taxpayer's Partner's Basis Worksheet, but I do not seem to be able to do this.

Using ATX,  I go to Form K-1 (1065), Tab 'Input', and I check the 'Calculate basis limitation' box as well as the 'Calculate at-risk limitation' box.  I can enter Cash Contributions into the Basis Limitation section, only when the 'Publicly traded partnership' box is NOT checked.  Once I check it, poof!, the Basis Limitation section disappears and the Basis worksheet is all zeros.

Does this mean that limited partner interest in a PTP will never have an outside basis?  There are capital contributions reported on the Partner's Capital Account Analysis of his K-1.

Thank you.

[Abby Normal]

No, you don't need to do that. PTP losses are limited, even if you have basis. See and print the PTP summary tab in the K1 input form.

When a PTP has income, you can use any carryover losses up to the amount of income. All losses are deducted on a final disposition.

When a PTP is sold (OR PARTIALLY SOLD), you will get a worksheet showing the adjustment to basis AND the portion of gain that will be ordinary income (on form 4797). The brokerage statement of investment sales will show the original basis of the investment.

On the 8949, enter codes BO in column f. B for basis adjustment and O for other. (Enter BMO if ther are multiple transactions on that line as well. BMOW if wash sales are in the mix. Codes are entered alphabetically.) Net the basis adjustment  and the 4797 portion by ADDING the basis adjustment and SUBTRACTING the 4797 adjustment. This might seem backwards, but it's not, because 8949 adjustments are adjusting the gain/loss, not the basis.

Then go to 4797 and enter a part II gain for the amount of the ordinary income adjustment. There is a drop down where you can choose the K1 that was sold or partially sold.

It's extremely easy to miss partial sales because the K1 isn't marked final. You have to carefully read all the attachments each year with the K1.

And you're supposed to attach 751 statement to the return. I have a generic 751 statement typed into a blank ATX statement for just this purpose, but I seriously doubt any problem could arise by not attaching this statement. Thankfully, I've never had to test that hypothesis.

https://www.thetaxadviser.com/issues/2018/apr/reporting-publicly-traded-partnership-ordinary-income.html

[Hahn1040]

does anyone have a reference for the section 163 (j) adjustment when reporting the sale of a PTP?

My client has two PTP sales and both have this listed on the sales schedule

I can't figure out how/where to report it or make the adjustment.

In the notes the sales report says: " If your 2018 or 2019 K-1 shows any Excess Business Interest expenses in Box 13K and you sold all of your partnership interest in 2019, please consult your tax advisor regarding adjusting the basis of your sold partnership interest by that amount."

Do I just add it to the basis?  Seems too simple???

...oh how I hate PTPs!!

[Abby Normal]

Found this:

Perhaps the most complicated aspect of the new law is what happens to the BIE once it is limited. Defined as excess business interest expense (EBIE), the amount becomes nondeductible in the current year and is carried forward to future years. It can only be deducted if, in a future year, the same activity that generated the EBIE in the first place now generates EBII or EBTI. Taxpayer A above, for instance, has EBIE reported to her from her interest in Partnership X. That EBIE will not be deductible in 2018 and will be carried forward to 2019. The only way for A to eventually receive a tax benefit and deduct the EBIE will be if X itself generates EBII or EBTI in 2019 or beyond and reports it on A’s K-1.

Despite EBIE being currently nondeductible, A is still required to reduce her basis in X to the extent of her allocation of current year EBIE. Even though it is a carryforward and potentially deductible in the future, basis is reduced immediately. That may lead to basis limitations in other areas, such as the inability to take future losses because of at-risk limitations, or the recognition of gain on a distribution in excess of basis. To the extent that the taxpayer disposes of the investment before getting a tax benefit for the carryforward, the carryforward disappears and is added back to the basis of the investment for purposes of calculating gain or loss on disposition.

https://andersen.com/publications/newsletter/Q3-2019/part-i-the-business-interest-expense-limitation-when-investing-in-partnersh

[Abby Normal]

My question would be, has the partnership included the cumulative excess business interest expense in the basis adjustments on the worksheets? My gut tells me the answer is no, because they can't know what has happened at the partner level.

The next question is, is the adjustment listed just for this year or is it the cumulative amount for all years?

[Hahn1040]

Thank you that answers it!   the carryforward disappears and is added back to the basis of the investment for purposes of calculating gain or loss on disposition.

The adjustment listed on the sales schedule is only for 2018 and 2019 (the TCJA years) and yes it has been part of the basis adjustment for 2018 and 2019.

Thank you so much for your help!