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K-1 (1065) Proshares ETF

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    #16
    Details

    Your software should do everything correctly with respect to the K-1.

    The figure of $134 will go to Form 6781, and then to Schedule D.

    The interest income of $6.00 will go line 8 on Form 1040.

    The "other deductions" will go to Schedule A, subject to the 2% floor. So if your client doesn't itemize, or if he itemizes but doesn't have enough to get over the 2% threshold, that deduction won't have any value.

    The short term gain on the K-1, in the amount of $5745, will go to line 5 of Schedule D.

    All of this should happen without any overrides.

    Even the data on Form 8949 is correct. But I think you have to enter an adjustment to the basis of the stock that he sold. The basis should be increased by the amount of $5780, which is the increase in capital.

    A couple observations:

    (1) I haven't figured out how the withdrawals and distributions got to $53,500. That's not a taxable amount, so it may not be an issue. It could be an error. It could have something to do with the split. Or it could have something to do with the fact that he still owned shares at the end of the year. I'm not sure I would worry about it.

    That being said, the gap between $53,500 and $45,323 is $8177. That amount is very close to the figure of $8716, which is the "true" amount of his capital gain--at least from the taxpayer's "hands on the money" perspective. It's close, but I can't explain the difference.

    (2) I think you can forget what I said earlier about allocating the increase in capital between the shares that he sold and the shares that he did not sell. There are no "shares that he did not sell."

    He did not buy shares, and then sell some, but not all of them. Each time he sold, he sold all the shares that he owned. At no time did he sell part, but not all, of his interest in this "partnership." That makes things relatively simple.

    (3) Form 8949 should show two sales transactions: one on 04/12 and another on 04/26. The one where you make the basis adjustment is the sale on 04/12.

    For the sale on 04/26, you have a different type of adjustment. That transaction is a wash sale. Or most of it is, anyway. He sold 67 shares, but then he bought 60 shares back in less than 30 days. So that's a small mess in and of itself. Only part of the loss of $44 is deductible; most of it has to be added to the cost basis of the stock that he bought on 05/02.

    But that follows wash sale rules like any other stock. I don't think that has any impact on the bigger issue of why the K-1 shows capital gain of 5745 that he did not actually receive in any recognizable form. The gain that actually showed up in his account on 04/12 was 8716.

    When you adjust the basis of the sale on 04/12 by the increase in capital, everything should work out correctly. He'll end up with a gain on Form 8949 of 2936, and gain from the K-1 of 5745. When you add those two numbers to the interest income of 6.00 and the income on Form 6781 of $134, you get a total of 8821. That's the same as his perceived gain of 8716--except for the $105 in "other deductions," which is getting sent over to Schedule A, never to be seen or heard from again.

    Is this starting to make sense?

    I hope you charge this guy a couple hundred bucks just for this segment of the return. LMAO

    BMK
    Last edited by Koss; 04-08-2012, 08:58 PM.
    Burton M. Koss
    koss@usakoss.net

    ____________________________________
    The map is not the territory...
    and the instruction book is not the process.

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      #17
      1065 - To BMK - Thanks

      BMK,

      Thanks again for your last post. I feel pretty confident now that I will be able to complete this return based on your input.

      Regarding the bill, I should charge him on your behalf for your guidance and advice on this case. I would never have figured this out w/o your help.

      Regarding the wash sale, Ameritrade did figure that amount out and put it on the 1099. I did not mention it as the amount is so small.

      Scott

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