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Linn Energy, LLC (LINE) Message Board

  • ronharv ronharv Mar 23, 2013 2:52 PM Flag

    Reply to Opinionsarelike

    Opinions,
    (Couldn't get the reply feature to work in the other thread.)

    I think that K-1's in regular accounts are where the dizzying paperwork comes in, especially when you sell and have to fill out several other difficult forms plus the several different forms required by the state. I've gone this route a few years ago and it was a horror. The 990-T in an IRA is a snap once you've got he first one done as a template, and I've posted how to do that. It's much simpler than it appears. (And because Linn has high UBTI losses, I'm only doing the 990-Ts as insurance against future unknowns. I could, as almost everyone else does, ignore the form.)

    Re the tax advantages of deferral, I don't see it as an advantage, especially in our low-interest-rate environment. You still owe lots of money when you sell and, as Lisa has pointed out, you can get locked in because of all the cash that you'll owe. So I really don't accept the contention that there's a compelling tax advantage to an MLP. Moreover, I have always asserted that LINE acts much more like a bond than a stock. IAnd I'm in it for the high income, which is sheltered in my IRA and can compound. My avg. buy-in for LINE is a bit under 29, so I'm getting 10% on my money, which will increase with the Berry acquisition. That's a lot better than my high-yield bond funds. So the goal in my IRA is income, and Linn currently provides it better than anything else in the account. This generalization about deferrals in a tax-sheltered account being verboten is a one-size-fits-all position that numerous internet sources seem to embrace. Of course, I could trade in the 10% for 6.5% in a high-yield bond fund by following the common advice. Somehow that doesn't seem especially wise.

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    • Ron !! The 990-t is filed by your IRA custodian unless yours is a self directed IRA.

    • Couldn't agree more, and I have all my MLPs in a taxable account. I sold some this year, and trying to navigate thought the sales reporting is guesswork at best; and I almost think it might be better if the tax deferral IS taken away and all are relegated to C-Corps status. I am not convinced that, after figuring out the sales data, that I made much over what a C-Corp would have paid anyway. But I'm too lazy to and tired of working through the numbers to attempt figuring it out.

      As long as you never sell MLPs - either in an IRA or a taxable account, you do OK (I think.) But sell them and you've lost most if not all of the advantages even if you have capital gains.

      • 2 Replies to rlp2451
      • I'm beginning to think that MLPs should be a life-time investment when in a taxable account. Does anyone know a satisfactory way of figuring the correct basis when selling? Some of the needed figures seem very difficult or impossible to find, and not on the K1s.

      • Roger, isn't the essential advantage in an IRA the high income that goes untaxable and is free of tax-deferral concerns? (Of course, initially choosing MLPs with a history of either minimal UBTI or, as with Linn, losses that can be carried forward becomes a requirement.) How does a sale in an IRA hurt you when there is no reporting vehicle to the govt. for such sales and no effort by the IRS to increase UBTI beyond that reported on Line 20v of the K-1. Possibly, but not necessarily, you could convince the tax dept. of your brokerage to pay UBIT upon an IRA sale, even if they disagree about its necessity, and possibly the IRS would keep the money. But I bet it would require a lot of effort. The old saw "Let sleeping dogs lie" comes to mind.

 
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