handling zero cost basis
by ALVINSCHO00 from MLP bd:
Re: How to handle zero basis
Ok, so as I understand assuming you have actual zero basis after including any non-recourse loans then you need to report distributions in excess of basis on sch D as long term gains. If you only have zero basis when not including nonrecourse loans, but possible basis when you do, then you don't need to report distributions in excess of basis tho you do need to tell TT to report not "all at risk" so it generates a Form 6198.
Ok so assuming you have to report distributions in excess of basis, here's one way to overwrite TT to make it happen. Go to the TT forms for you specific K-1 and go to Section A "Passive activity adjustment to income or loss - for regular tax purposes". On line 6a, "non-portfolio capital gain" in column a, overwrite the value to the amount of distribution in excess of basis you need to report. Now look at line 9 "Total" column c and if it is positive, you can go to line 1a "Ordinary Income" column d and report a greater loss as long as column d doesn't go positive and the line 9 col c doesn't go negative. You will also have to adjust line 3 column d since TT doesn't automatically update it.
You will then need to repeat this for Section B which is the same stuff except it handles the AMT version.
Finally, go to form 8949 and you will see an entry generated by TT from the cap gains value in entered. Overwrite the description to be "distributions in excess of basis - name of partnership". So now the required long term gains have been recorded for sch D and the extra ordinary loss will show up on Sch E, all while maintaining the correct carry forwards for the next year.
Hope that helps.