There's plenty of info out there on the internet on tax reporting of MLPs. In general, you will get a K-1 which will list the distributions that you received. You will NOT get a 1099 DIV which is how dividends are reported for inclusion on your tax Schedule D. There is a website called something like www.taxsupport.net which houses many of the MLP K-1 forms. Once you enter that website, you select your particular MLP and insert your SSN and it pulls up your K-1 which can then be downloaded directly into TurboTax. Most MLPs participate, but there are a few that don't. As for the return of capital, your K-1 should include a reconciliation of your "capital account" which is basically the amount you invested in the MLP (your cost basis) reduced by the sum of distributions that you have received over the years, which should eliminate the need for you to track this separately. Finally, you report your share of the MLPs income as ordinary income (it's one of the boxes on the K-1 and once the K-1 is downloaded into Turbo Tax, it puts it into the proper line on the tax return. If the partnership has a loss, there are limitations on how you use those losses (I believe they can't be used to offset other ordinary income, but can be used to offset other passive income from other MLPs but).
Mark thanks so much. I can really see I am screwed. I have never even had to file a Schedule D. Now not only do I have stocks to worry about, I have MLP's, but also REITs. I suppose REITs work about the same as MLP's as far as taxes. I could not fine that website you mentioned, but TARGA's stated their K1 could be downloaded mid March. Thanks again.