Where do I find the K-1 basis worksheet?

The worksheet is in the IRS Partner's Instructions for Schedule K-1 (Form 1065), page 2. It's not a separate form you file — it's a calculation worksheet. The K-1 Basis Tracker implements it automatically.

What happens if my basis goes to zero on Line 10?

Any remaining distributions become taxable gain under §731, and all partnership losses are suspended under §704(d) until basis is restored.

Where do Box 1 losses go on the worksheet?

Negative Box 1 amounts go to Line 11, NOT Line 4a. Line 4a only takes positive income. The loss is limited on Line 12 to available basis.

How do liability changes affect my basis?

Increases in liability share (Item K) go to Line 3 as a basis increase. Decreases go to Line 9 as a basis reduction. Item K is at the bottom of K-1 page 1.

What is the difference between Lines 14 and 18?

Line 14 is basis after §704(d) loss limitation. Line 18 is final basis after optional at-risk limitation (§465). For most MLP investors, they are equal.

Can the K-1 Basis Tracker calculate this for me?

Yes. The K-1 Basis Tracker implements the complete 18-line IRS worksheet automatically from your K-1 data.

The IRS K-1 Basis Worksheet: Every Line Explained with Examples

Q: Do I have to complete this worksheet every year?

Yes. Your ending basis each year becomes next year's beginning basis. If you skip a year, every subsequent year is wrong.

The Partner's Adjusted Basis Worksheet is the IRS-required calculation for tracking your MLP cost basis. This is the definitive line-by-line reference with realistic MLP numbers on every line.

By Lucas Andersen — Last updated March 6, 2026

What This Worksheet Is

The Partner’s Adjusted Basis Worksheet is in the IRS Partner’s Instructions for Schedule K-1 (Form 1065). It must be completed every year you hold MLP units. Your ending basis each year becomes next year’s beginning basis. If you skip a year, every subsequent year is wrong.

Lines 1-3: Starting Point

Line 1: Beginning basis (prior year’s ending, or purchase price for year 1). Line 2: Contributions ($0 for most MLP investors). Line 3: Increased share of liabilities from K-1 Item K (if ending > beginning). Liability increases are treated as deemed cash contributions.

Lines 4a-4o: Income Items

Only POSITIVE amounts from K-1 boxes. Negative amounts (losses) go to Line 11. Line 4a: Box 1 ordinary income (usually $0 for MLPs because Box 1 is typically negative). Lines 4b-4j: Boxes 2-11 (rental, interest, dividends, capital gains). Line 4m: Box 18A tax-exempt income. Line 4o: Total of all income items.

Lines 5-7: Subtotal

Line 5: §737 gain ($0 for most). Line 6: Excess depletion ($0 for pipeline MLPs). Line 7: Subtotal = Lines 1+2+3+4o+5+6. This is your “high water mark” before distributions.

Lines 8-10: Distributions

Line 8a: Cash distributions from Box 19A — the primary driver of basis erosion. Line 8b: Property distributions ($0 usually). Line 9: Decreased share of liabilities from Item K. Line 10: Basis before losses = Line 7 − 8c − 9. Cannot go below zero — excess is §731 taxable gain.

Lines 11-14: Loss Limitation

Line 11: Total losses (absolute values of negative K-1 items + §179 + other deductions + prior suspended). Line 12: Allowable losses (lesser of Line 11 or Line 10). Line 13: Suspended losses (Line 11 − 12) — carry forward to next year. Line 14: Basis after losses = Line 10 − 12.

Lines 15-18: At-Risk and Final Basis

Lines 15-17: At-risk limitation (§465). For most MLP investors, no additional limitation applies. Line 18: Ending adjusted basis. This is the number the IRS expects when you sell.

EPD Example Summary

500 EPD units, year 2: Beginning $11,400 + $350 liability increase + $25 tax-exempt income − $1,025 distributions − $480 ordinary loss = $10,270 ending basis. Broker shows $13,000. Gap: $2,730 after just 2 years.

Why Your Broker’s MLP Cost Basis Is Wrong — Why you need this worksheet
How MLP Distributions Erode Your Basis — Lines 8-10 in depth
Section 751 Recapture — What accumulated depreciation means at sale
Enterprise Products (EPD) K-1 Guide — Example MLP used in this guide
K-1 Basis Tracker — Calculates every line automatically