How to report bankrupt oil & gas PTP on Schedule D ?

[AZUKHiker]

Nil Gain / Loss

If the -ve basis adjustments are the same as or more than the original purchase basis then you have no basis on bankruptcy and no proceeds.

If you want to verify the basis adjustments from the K1s look at the K1s and:
Lines 1 to 11 increase basis or reduce if loss
Lines 12,13 reduce basis
Line 18 increase/reduce basis
Line 19 reduce basis
+/- movement in share of liabilities

[FEDUKE404]

Zeros all around

If the -ve basis adjustments are the same as or more than the original purchase basis then you have no basis on bankruptcy and no proceeds.

If you want to verify the basis adjustments from the K1s look at the K1s and:
Lines 1 to 11 increase basis or reduce if loss
Lines 12,13 reduce basis
Line 18 increase/reduce basis
Line 19 reduce basis
+/- movement in share of liabilities

So Schedule D shows zero for the sales price and zero for the cost basis, and a net zero for the whole event? (There is a Form 1099-B from Merrill-Lynch for the disposition.)

Interesting. . .that's what some tax gurus had stated before this thread even got started.

FE

[Kram BergGold]

My guess

Sale price $11,201
Cost $3362.
Here is my thinking. The adjustments to basis were greater than the basis but basis can't be reduced lower than zero. Then the $3362 got added to income so this is basis.

Then the $11551 is long term ordinary gain on form 4797.

[FEDUKE404]

Now I'm really confused

Sale price $11,201
Cost $3362.
Here is my thinking. The adjustments to basis were greater than the basis but basis can't be reduced lower than zero. Then the $3362 got added to income so this is basis.

Then the $11551 is long term ordinary gain on form 4797.

OK. Now I'm totally lost. Maybe too much football viewing??

With NO PTP "adjustments" there would, in theory, simply be a long-term capital loss of $11,203 (purchase cost of original investment later becomes worthless scenario).

The partnership has stated, in documents accompanying the K-1, there is a negative "adjustment to basis" in the amount of $11,551.

To my feeble mind, this would seem to indicate the original cost basis would thus be adjusted to zero. (Unless you can somehow have a negative basis in the amount of $348 ?)

If the sales proceeds were zero, and the adjusted cost basis was also zero. . .the amount to appear on the Schedule D / Form 8949 is . . .zero.

The original K-1 has provided a + ordinary business income amount (there were prior-year losses), a short-term capital loss amount, a long-term capital loss amount, a COD amount, and a large ($11,545) Section 1231 loss. Each of these numbers now appears, through the magic of tax software, on the appropriate forms. The Section 1231 loss is on line 2 of Form 4797 and eventually settles on line 14 of Form 1040. (I only entered the numbers on the K-1 Form 1065 PTP worksheet, which automatically populated the forms.)

With a situation of this type, I've always thought the K-1 numbers pretty much spoke for themselves, and that was it so long as they were properly entered and transferred to the various tax forms. No additional "side calculations," by the tax preparer, related to those K1 entries are required. But since the brokerage firm, issuing the Form 1099-B, has no knowledge of the "history" of the PTP, it IS my responsibility to calculate a separate Schedule D gain/loss based upon nothing more than the original (market) purchase price of the units, the sales proceeds (in this case, zero) of the units, and the application of the appropriate "adjustments to basis" as provided by the PTP.

I feel I have successfully accomplished all of the above. What am I somehow missing ??

FE