Most individuals who get involved with publicly traded partnerships (PTPs) do so because the investment was recommended by a broker. You, as the tax pro, need to know how to correctly report this information.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.
Q: Should a person keep their Schedule K-1 each year to track adjustments?
A: There is no mandatory requirement, but yes, it’s a good way to track basis.
Q: Is the cumulative basis provided on the Schedule K-1?
A: It may be, but the taxpayer shouldn’t rely on it as accurate. The actual basis may have other adjustments that the partnership doesn’t account for.
Q: How can a taxpayer determine a good starting point for basis if they lack prior year information?
A: Unfortunately, without a starting point, it’s difficult. The taxpayer should try to obtain prior year information from the PTP or broker. PTPs often provide prior year details online. Another option is to request IRS transcripts.
Q: Can a taxpayer deduct part of the suspended loss if they don’t sell all of their units?
A: No. Due to passive activity limitations, a taxpayer cannot deduct any part of their suspended losses until they sell their entire PTP interest.
To learn more about selling a publicly traded partnership, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.