I believe I need to be paying capital gains tax on a MLP (PTP) purchased in 2003. The K-1 in 2008 showed a "beginning capital account" of 100 and an ending capital account of -1000.
As I understand it, as soon as the capital account goes negative, any distributions are to be treated as capital gains and should be reported on Schedule D. Since I did not report it for 2008, I may need to do a
1040X for 2008.Here are the facts for K-1's in 2008 and 2009: (Tax Basis block is checked)
2008 2009 Beginning Capital Account 100 -1000 Current Year Increase -300 -350 Distributions (800) (800) Ending Capital Account -1000 -2150
- For 2008, it would appear that since the Ending Capital Account is negative, all of the 0 in distributions should be treated as capital gain and I should have entered that on my Sched D worksheet showing cost as 0 (06/30/2003) and sales price as 0 (12/31/2008)
- For 2009, it appears the same applies and I should again show a capital gain of 0 on the worksheet.
Do I have that right so far?
Does the fact that I am now paying capital gains tax on my distributions have any impact on the tax basis of the capital account?
Since I had over $12,000 in tax loss carryover from before 2008 , this correction on my 2008 would not have any impact on the tax due to the IRS. However, it would reduce the amount of my tax loss carryover.
Can any one direct me to a link or book that explains the nitty gritty details of how this situation should be handled on the 1040?