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Posted by Ira Smilovitz on May 11, 2008, 4:44 pm
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> wrote:
>
>
>>
>>There are certain items that are reported on Schedule K-1 which the
>>individual taxpayer can elect to treat in more than one way. The choice of
>>treatment affects the tax basis but the PTP has no way of knowing which
>>election the taxpayer made. These issues do not affect all PTPs, so you
>>may
>>not encounter the problem. See the section titled "Elections" a little
>>higher on the same page.
>>
>>> Strange that the IRS says you cannot trust the box L analysis done by
>>> the partnership, which probably hires pros. But then it's OK to trust
>>> your own records and analysis, and I for one am quite confused :).
>>
>>Ira Smilovitz
>>
>
> 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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