on which form to report sale of PTP


R

removeps-groups

On which form does one report the sale of a PTP? I always thought it
was Schedule D. But some posts here have been saying to use form
4797. What are the differences between the two forms?

It looks like on form 4797, you cannot report a loss from a passive
activity because in the instructions there is a section "Passive Loss
Limitations". This doesn't make sense because if you buy a publicly
traded stock symbol and sell it at a loss, you should be able to take
the loss.
 
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K

Kadaifi

On which form does one report the sale of a PTP? I always thought it
was Schedule D. But some posts here have been saying to use form
4797. What are the differences between the two forms?

It looks like on form 4797, you cannot report a loss from a passive
activity because in the instructions there is a section "Passive Loss
Limitations". This doesn't make sense because if you buy a publicly
traded stock symbol and sell it at a loss, you should be able to take
the loss.
There may be two kinds of gains and losses associated with the sale of a
PTP and therefore both forms may need to be used:

1. Capital gains or losses are reported on Schedule D.

2. Ordinary gains or losses are reported on form 4797.

The amounts associated with 1. and 2. are reported to you on a "Sale
Schedule" provided to you by the PTP after the sale. Use the amounts
shown in the "Sales Schedule" to fill out Schedule D and/or form 4797.
 
R

removeps-groups

The amounts associated with 1. and 2. are reported to you on a "Sale
Schedule" provided to you by the PTP after the sale. Use the amounts
shown in the "Sales Schedule" to fill out Schedule D and/or form 4797.
Thanks. How does the partnership determine these amounts?
 
K

Kadaifi

Thanks. How does the partnership determine these amounts?
Basically, the amount of the tax free distribution you originally
received from the PTP less certain adjustments e.g. depreciation, etc is
taxed as ordinary income and reported on 4797. This plus some other
items are used to adjust your cost basis for calculating your capital
gains and reported on Schedule D.

For an example of a simplified calculation, see Attachment A in the
document located at:

"http://www.foxexchange.com/public/fox/advisors/sa_materials/CTC-whitepaper-mlp-10_2007.pdf"
 
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