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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1408
Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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I have 2 Questions. First, If one sells shares of an MLP which

Resolved Question:

I have 2 Questions. First, If one sells shares of an MLP which I have owned for over 7 years
and its cost basis is now below zero, I assume I must pay the LT capital gains tax rate on the difference between the original purchase price and the sales price and also pay my normal tax rate of 25% on the difference between the purchase price and the adjusted cost basis. Is this correct? If so, on what form or forms do I show the difference between the purchase price and the adjusted cost basis.
Secondly, if one continues to hold the shares with an adjusted cost basis below zero, how are the cash distributions taxed? Where do I report this?
For ur info, I am familiar with K-1 reporting but have not encountered this situation
where my cost basis is noe below zero.
Submitted: 5 years ago.
Category: Tax
Expert:  Jax Tax replied 5 years ago.
Basis cannot go below zero. If the adjusted basis is 0, capital gain is charged on the entire sales price. Can you explain how you believe the basis was reduced specifically below zero?
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