Sale of units owned in limited partnership

[origun]

Client sold some of the units he owned in a limited partnership (Enterprise Products Partners). The 1099-B doesn't give a basis but I have a Sales Worksheet provided by the partnership. It gives Sales Price (c. $20,000), purchase price (c. $12000) and Cumulative Adjustments to Basis (c. -12,500), giving a cost basis of c. -$500. How is that possible?! And...my software doesn't allow me to enter a negative cost basis.

What am I missing? I have limited experience with K-1s and limited partnerships so would appreciate any help from the experts out there.

[ATSMAN]

Who is preparing the LLP Form 1065? They should have provided a K-1 for this partner showing the correct amounts in the appropriate boxes. It appears there is a net loss of $500. You need the K1 to correctly prepare the 1040. You may want to put the 1040 on extension. I have 2 clients that are suppose to receive K-1s from limited partnerships and as of Monday there were not available. Today I informed both of them that their 1040 will go on extension.

[Lion]

Exactly. The K-1 will include a grid for the sales, noting amounts that might appear on other forms, such as 4797, as well as help you compute adjusted basis. Form 1099-B will tell you little except for the sales proceeds.

https://www.taxpackagesupport.com/

[origun]

I have the K-1 prepared by the company. However, it doesn't seem to have any information relevant to the sale. Capital account goes from -621 to -359,liabilities go down from 17k to 3k and Part III has small amounts in various categories, nothing unusual and easy to input. I just can't see how the K-1 fits into the "Sales Worksheet" included with the K-1 packet. The units sold, sales date, proceeds all match the 1099-B and the initial purchase price given is close to what client says. I just don't know what they mean with a negative "Cumulative Adjustment to Basis". It's not anything I have seen before.

[Lion]

He's had more losses than his basis.

You're dealing with two different things. You have the usual business income and deductions from the main K-1. Then you have the sales of his shares using the Sales Worksheet and other information from your packet. If your packet does not include the detailed instructions, you can probably get them from Tax Package Support.

[kathyc2]

I believe the cumulative adjustments would be the losses reported by the LLP over the time client held it. Since it's a passive loss, client probably did not take the deduction, unless they also had passive income and used it to offset. If the loss was not taken over the years you would have a suspended loss which will be "released" to offset regular income when the underlying investment is sold.

[origun]

After reading all your thoughtful suggestions and doing some research, I have concluded that the main reason for the negative basis is that he has had distributions for over 20 years that have not been taxed and thus reduce basis to below zero. My software won't accept a negative number as cost basis so I have put in zero. That leaves me with this next problem: I still have this figure of about $500 which is ordinary income. Does anyone have a suggestion as to where I put it? Why do these clients buy limited partnerships; I have yet to know anyone who was satisfied in the long run! Thanks!