Contact UsI sold an interest in a publicly traded oil and gas partnership. How does the schedule that the partnership work?
TaxConnections Members... Answer This Question
Want To be One of Our Tax Experts? Register Here
Tax Professional Answers
Brett Thompson, JD, CPA
If you sold in an interest in one of these partnerships, you very likely received a schedule that might be titled, “How to Utilize this Schedule” which will list the units disposed of, Disposition Date, etc..
The concern comes when you take the original basis, which the partner will have as he knows how much he paid for the interest. But only the partnership knows how much distribution the partner received throughout the time the partner owned the interest.
Unlike common stock whose basis is rarely adjusted, the partnership interest basis is reduced for payments to the partner.
Thus, you subtract if there are brackets around the number (or add) to your cost basis the amount reflected by the partnership in the column titled, “Cumulative Adjustment to Basis.” If that net number is positive, then subtract it from the sales proceeds usually in column 3. You put that gain or loss in column.
If a gain, then it has to be further reclassified as ordinary or capital, and the schedule provides the ordinary portion supplied by the partnership and is entered on Form 4797, Part II, Line 10. The balance is capital gain and is entered on Schedule D.
Leave a Comment
319 weeks ago
The concern comes when you take the original basis, which the partner will have as he knows how much he paid for the interest. But only the partnership knows how much distribution the partner received throughout the time the partner owned the interest.
Unlike common stock whose basis is rarely adjusted, the partnership interest basis is reduced for payments to the partner.
Thus, you subtract if there are brackets around the number (or add) to your cost basis the amount reflected by the partnership in the column titled, “Cumulative Adjustment to Basis.” If that net number is positive, then subtract it from the sales proceeds usually in column 3. You put that gain or loss in column.
If a gain, then it has to be further reclassified as ordinary or capital, and the schedule provides the ordinary portion supplied by the partnership and is entered on Form 4797, Part II, Line 10. The balance is capital gain and is entered on Schedule D.