Cost Basis of PTP's on K-1/1065

Apr 19, 2008 21 Replies

Yes, indeed, me too.

The problem with using the entries on the K-1 is that positive numbers may actually be negative and vice versa. E.g., Box 18C "Tax-exempt Income and Nondeductible Expenses." If it's tax-exempt, does it add to or subtract from Tax Basis? Is it included in the Box 19A Distributions or is it somehow separate and not actually distributed to shareholders? Just WHOSE income is it, anyway?

I assume the K-1 items you refer to that the taxpayer can elect to treat in different ways (and that therefore cannot be incorporated in the PTP's K-1 Box L) include Passive Losses and Carryovers. You can elect, it appears, to deduct or not deduct these in any given year.

The rules governing these items are way over my head, and all I can do is enter into TurboTax whatever figures from the K-1 it asks for. When it asks if I want to deduct the Losses, I say (wottheheck!) Yes, but I really have no idea what I'm doing. Presumably this deduction affects my Tax Basis but how? And that's just for one year--the cumulative effects of the Passive Loss entries over a period of years are also over my head, though TurboTax does appear to take a not-too-reliable stab at keeping track of them.

And then there are separate figures and formulas for AMT! I have no idea how these fit in.

Maybe individual shareholders in a PTP are not permitted to deduct Passive Losses at all (or do other things with certain K-1 amounts) but the PTP's K-1 instructions, the IRS's instructions, and TurboTax's instructions all seem to assume you are a tax professional and know the answers.

Still dazed & confused, Art

PTPs are not simple investments but the solution is simple. Either pay for professional tax preparation services and hire someone who does understand these complex rules or choose to invest in less complex investments.

Ira Smilovitz

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