Did anyone else use turbo tax this year? When I enter the values from the K1 I end up with a tax liability that is 56% of the Income or 70% of my distribution.
Does that make sense? Could the Non-passive income from the unrelated business taxable income be the cause? They reported this in 20V, that was 52% of the overall. The only deductions I got were depletion and intangible drilling costs.
That sounds about right. Unfortunately most of the E&P MLPs (EVEP, VNR, LINE, etc ) had large profits this year. Not sure why - it may be due to hedging profits. Has nothing to do with UBTI which by the way is usually the same number as Box 1 (although EVEP subtracts IDCs and Depletion in their calculations.
One advantage is all the taxable income increases your basis which will decrease any cap gain and ordinary income when you sell
To answer your question- distributions are a return of capital and are not taxable as long as your basis is greater than zero. (They do get fully taxed when you sell). However any items of income (Box 1) and expense (Depletion and IDCs among others) get passed through to the the partners and are reportable on the individual tax returns. This the whole premise of partnership taxation.