I found a good article last night that explains it quite clearly. Search for "aaii journal making sense of mlp" in your favorite search engine.
Some key points: The hardest thing for most folks to understand is, MLP distributions are not taxed - they simply reduce your cost basis, it's like being reimbursed part of your purchase price. Line 1 losses only can be used to offset future Line 1 income, and only for the same MLP. Interest and dividend income flow directly to your 1040, and unless the MLP had income (Line 1 positive number), those are likely to be the only tax consequences, other than perhaps AMT calculation. Many expenses can not be used by a receiving partner unless they have tax-reportable activity of that type to apply them to. That is expecially true with ETP. The real tax consequences come when you sell the shares. Then you need to accurately calculate your cost basis against the sale price, apply depreciation, and the remainder is taxed as capital gains.
The above-mentioned article explains it quite well. The important thing is, keep all the K-1's so you can do the big math when you sell your shares (units).
Yes, we are in a down turn with fossil fuels.....its old tech....and expensive....Solar and wind is booming...and will become a lot cheaper as the infrastructure is put in place...sure we need the pipeline for NAT GAS....but oil pipelines will not be needed as much
I see wells being capped and consumption stabilizing or increasing. The glut will be brought down and prices will start to rise. We shall all see how this plays out.
What did you do for the sections that are not broken out on the supplement section, like part L for instance? The later sections seem clear, but for the initial ones like L or where you're asked to list the percentage, did you use the same for all 4 entries?
And what did you do for those entries with both values in box 1 and 2. Use the same subsequent supplement entries all the way down? Thanks for any insight into what you did.
I filled out Part 1, and Part 2 for the main K1 entry from the K1 ETP provided and entered everything.
For the other K1s: - Part 1: I entered the "company name (ref ETP)", address, and EIN for each K1 entry. Part 2: I copied everything from the main K1 - but left lines J thru M empty.
I put this information in 2 separate K1s. The business activity (box 1) is part of the main ETP K1. The rental real estate activity (box 2) is one of the other 3 K1s I created. The business activity has everything but box 2. The rental activity K1 has only box 2 in it (everything else is empty). This made the most sense - I am not sure if it is 100% correct.
Thanks for sharing. When you say everything, though, I get it for the supplemental stuff. But did you put, for instance, the ownership portion with the same percentage for both? Or you went with what it showed for the "main" return and then 0 for the 2nd K1 (box 2 one).
I never repeated the ownership information in any of the tiered K1s (or rental activity). (this was info in Part II of the main ETP K1). This is the part I left empty in the additional K1s. For the company name in the sub K1s - I put something like "Sunoco LP referencing ETP", etc. so if people (or auditors) want to look at the ownership info - they can go back and see it in the main K1 (ETP). Also I never used part III of the main K1 - I only used the supplemental information for part III. Note: this is what I did - and what I think was recommended on the Turbo Tax forums - but it may not be correct.. Use at your own risk..
Great post. So theoretically if i was to purchase ETP for 31.12 in April of 2016 and sold in April 2017 for 31.12 my cost basis would remain the same but how much of the significant distribution say its 10% would i have to pay tax on?
Your adjusted basis at time of sale would be decreased by the distributions you received (as well as other factors), So conceptually that is when you "pay taxes on the distributions" - when your capital gain is calculated. If ETP had an operating loss over that period, that would reduce your gain. You apply K1 Line 1 gains in the year they are realized, and apply losses either to future gains, or to the final tally at time of sale.
For the most part, it's really the same rule(s) as if we owned the business. If you've ever owned a business, some of these concept would be familiar ones. You pay taxes on the profits of the business, not on how much $$ you draw out of the company. If the company loses $$ a particular year, no taxes are due, they carry forward and apply to future profits tax-wise, yet you still likely have withdrawn $$ to live on. Distributions to partners are the same way.
The "Street" may sniff a deal killer in the ETE/WMB deal...The lay offs and HQ closure in Tulsa are a MUCH bigger deal then you think. The WMB shareholders (many are employees) may veto the deal.
I have been doing my own taxes for the past 5 years and I find that Turbo Tax Premier takes you by the hand and walks you through the K-1 torture chamber.
That's why Warren made it public now and not after the vote. He wants out or the ability to negotiate for a better price and in return offer to keep the Tulsa folks on the payroll.
This merger has been a pos since day one. I think etp would love to cut and run but the agreement does not allow for a out. Hopefully shareholders will kill this pig...
Key line, "We believe the partnership’s distribution is secure and the 13.4% yield is attractive, but near term challenges may limit price appreciation."
These guys make absolutely no sense. If you actually believed the yield was secure, you would be buying hand over fist and putting it away.