Assistance needed - Line 11F of Schedule K-1 for PTP

[FEDUKE404]

Schedule K-1 (PTP) for an "investment partnership" has a negative entry on line 11F ("Total other income/loss")

The number is the net of Section 475(F) Mark-to-Market Gain/Loss, Swap Income, Swap Expense, and Sub-Part F Income.

This information is shown with the Schedule K-1 cover letter:
"XYZ has taken the tax return filing position that its direct activities generally constitute a trade or business for federal income tax purposes. As such, XYZ’s expenses, other than interest, have been included on Schedule K-1, Box 1 as an element of ordinary business income /(loss). XYZ’s share of expenses from an investment partnership have been reported on Line 13K. Furthermore, XYZ is subject to a mark to market election as a trader in securities under IRC Section 475(f)(1). All gains and losses (which are ordinary gains) pursuant to this election have been included on Schedule K-1, Box 11, Code F. Capital gains and losses on securities not covered by the trader election have been included on Schedule K-1, Boxes 8 and 9A."

Please note that none of the distributive share items reported on this Schedule K-1 are considered as derived from a passive activity under Treasury Regulation Section 1.469-1T(e)(6). Accordingly, income allocated to you on this Schedule K-1 generally will not be able to offset passive losses you incur from other investments.

PART III, BOX 20 OTHER INFORMATION, CODE Y – NET INVESTMENT INCOME: The partnership is engaged in the trade or business of trading in financial instruments. As such the income/loss from this activity is subject to the net investment income tax under IRC Section 1411. Therefore, these amounts generally need to be reported by individuals, estates and trusts on Form 8960, in addition to the forms indicated on page 2 of Schedule K-1."


Where do I show the amount represented by Line 11F ? ? ?

I have pretty much eliminated anything resembling passive activity (Schedule E, Part II) as well as anything on Schedule D.

The best I can come up with is inclusion on Form 4797, Part II line 10. Has anyone encountered such before? Agree/disagree?

And, for bonus credit, what goes to Form 8960 ? (There are already separate "income" entries on lines 1, 6, and 8 of the Schedule K-1 and those numbers have transferred to Schedule E, Part II column j as well as to Schedules B and D .)

Thanks.

FE

[Roland Slugg]

All the K-1s my clients have sent me from PTPs have been accompanied by a large, fold-out "road-map" with arrows pointing to every amount on an oversized, sample K-1 and a detailed explanation telling where to put that line-item on the investor's tax return. If you didn't get that road-map, maybe a visit to the PTP's web site would be helpful.

But did you say that the amount on line 11 (Code F) is the total of several of the amounts reported on other lines on the K-1? If so, what it probably means is that those other amounts are not to be reported at all, as they are offset by the amount on L-11 (F). Just a wild guess. If that's not it, I would just reduce the income shown on L1 by that loss on L11, and report only the net amount/difference on Schedule E, page 2.

[FEDUKE404]

Line 11F entry explanation

All the K-1s my clients have sent me from PTPs have been accompanied by a large, fold-out "road-map" with arrows pointing to every amount on an oversized, sample K-1 and a detailed explanation telling where to put that line-item on the investor's tax return. If you didn't get that road-map, maybe a visit to the PTP's web site would be helpful.

But did you say that the amount on line 11 (Code F) is the total of several of the amounts reported on other lines on the K-1? If so, what it probably means is that those other amounts are not to be reported at all, as they are offset by the amount on L-11 (F). Just a wild guess. If that's not it, I would just reduce the income shown on L1 by that loss on L11, and report only the net amount/difference on Schedule E, page 2.

Earlier today I visited the web site for the PTP and what they had available is everything I already have. Some (most?) other PTPs, especially of the oil/gas variety, have had such road maps and their usefulness varies. They do have an 800 number and a specific email address, but I fear I will be hit with the usual "Please consult your tax advisor" which I did not bother to include in the blue highlighted excerpts from them as shown in my original post.

To clarify: There is a SINGLE number on the K-1 for line 11F. While there is indeed a breakdown of the five numbers that were added together to give the single number on line 11F, those numbers appear nowhere else on the K-1. (The line 11F net number apparently can "stand alone.")

Here are the five entries, which were netted to give the line 11F total, denoted as "Other Income(Loss)" that appears on the K-1:

• *Section 475(F) Mark-to-Market Gain/Loss
  *Section 475(F) Mark-to-Market Gain/Loss - US Treasuries
  *Swap Income
  *Swap Expense
  *Sub-Part F Income

I've reasonably satisfied myself that the single number for line 11F does land on line 10 of Form 4797 Part II, not unlike where the "ordinary gain" from a PTP disposition also settles. I was just hoping someone on the TTB boards had knowledge of / experience with this weird bird.

Thanks for the input. I'll reattack tomorrow when my head might be a bit clearer.

FE

[FEDUKE404]

Info received from PTP

Surprise. . . surprise. . .

"Thank you for contacting Partner DataLink for XYZ LLC. We are unable to respond to your question because we are restricted from providing tax advice. However, as per the instructions on the K-1, it says to refer K-1 Instructions booklet."

(They were kind enough to send me a PDF copy of the 2014 IRS instruction booklet for Schedule K-1 / Form 1065.)


Following is excerpt from my email message to the "if you have any questions concerning your Schedule K-1" organization. Barring anything new, this pretty well states my conclusions on the matter:

From reading your unitholder information, it is my understanding that the line 11F entry is a separate set of "income" from that which appears on line 1 of the K-1. None of the income from XYZ is deemed to be passive income, and the Schedule K-1 line 1 income must go to *column j" of page two of Schedule E.

My best conclusion, so far, is that the line 11F entry should be included on Form 4797, Part II line 10.


FE