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Enterprise Products Partners L.P. Message Board

  • pastor4us pastor4us Jul 26, 2005 12:30 PM Flag

    Whats you take??

    The results for the quarter were kind of a mixed bag. I guess I was a little disappointed. I would like to hear and Iam sure others would to from you guys on this board who have a really good handle on all this. It just seems to me we missed by a long shot where we should have ended the quarter up at, but our distribution was raised a penny so thats good. Iam a little confused, what gives here??

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    • Actually its not very silly. Several times a week I get calls from people with what they perceive to be legal problems. Sometime the law can't help them, in my opinion. Sometimes I can't help them because it is not in my area of practice, so I refer them to someone else. Sometimes they become clients. I do answer at least 20 questions per week for free in recruiting new clients. However, I can't post my information here as there are strict rules against the improper solicitation of business set by the Missouri and Illinois Bar Association, which are the states I practice in.

    • Nice. Thanks to the both of you.


    • If you will post your address, I will send you 20 legal questions and I want free answers. Maybe I'm shopping for an attorney and maybe I'm not.

      Sounds sort of silly, right?

      Most simple tax questions are not simple and the answers, if written correctly, can fill several pages. To send 20 such questions to a talented professional will create a substantial bill.

      Shopping for a tax professional is basicly finding out specifically who in the firm will do your work and their experience level. If you want tax work done, make sure they are a tax guru, not an auditor filling in during tax season.

      However, if you choose the question and answer route, I would suggest asking one good question and measure the answers you receive. "How many acres surrounding my home can I treat as my homestead when I sell it? I have a small house on 200 wooded acres." Sounds simple but few CPAs will know the answer without research. The answer is it's a "facts and cirmstances" determination. The "homestead" acreage is limited to the land you use and enjoy. So if you took long walks in your woods, you might take the position the entire 200 acre forest was your homestead. Researching the answer requires sifting through court cases from 1953 to present. A quick wrong answer will tell you what you want to know about the firm's depth of resources and propensity to blow smoke at clients.

    • As an attorney, I can tell you that people who do not communicate with you, the customer, are not doing their jobs. I would suggest that you write down the 10-20 questions you want answered and submit them to several accountants and then review the answers. Pay them for their time. You don't even have to talk to them. I would further suggest you review the answers to see who knows that they are talking about and who explains things best to you and consider forming a relationship with that person. There are good professionals out there who want your business and want to help you, believe it or not.

      Best of luck

    • You're right. My experience however, with professionals of all types, whether they be MD's, attorneys, or tax accountants is they all speak with a tone of authority and conviction maximizing the use of the their titles of authority.
      These types of people aren't very willing to be seriously questioned, and expect their titles to speak for their competency. The effort of distinguishing a truly competent professional is significant and difficult to establish simply through anecdotal recommendations.
      I'm much more trusting of someone on this board (even with never having met them) because they're in a very similar position and seem more likely to provide accurate information.
      I've only been in MLP's since KSL was spun off KAB in 2001. That's when I recognized MLP's were goldmines.
      Hopefully as I become more knowledgable in the long term complexities and advantages of MLP's, I can also become a contributor to others' investing success.

    • Not to overstate the obvious, but if you have the 10K blocks you are making more in income from the MLPs than your regular job. Congratulations on that. Don't you think it is worthwhile to spend a few hundred bucks to talk to an accountant? I use turbotax and am very comfortable and happy with it for MLPs, but I am playing for smaller stakes.

    • Those were some very well articulated explanations. Thank you very much. I have one more question regarding tax concerns. I'm 41, have a regular 50k/yr job but I've been a successful investor through 20 years of living very frugally.
      I currently own 10,000 share blocks of 4 different MLP's and I'd like to hold them for a very long time.
      What would be a likely tax scenario for me 20 years down the road? Is it possible to predict this? I currently own EPD,ETP,PAA, and TLP. Obviously TLP is a risk but I'm keeping a close watch on it.
      I've decided to do my own taxes this upcoming season since a number of people have enthusiastically endorsed turbotax.
      My investment success far exceeds my tax knowledge and I'm nervous about this new realm of complexity.
      Thanks so much for taking the time to educate me on this issue.

    • What happens if you just never sell. YOu take all the distribution, tax deferred, return of capital, whatever, and then just die.
      Your relatives would get the stepped up value, but what about all the other accounting issues.

    • Here's an example. Say you buy a pipeline for $20 million and it's your only asset. At the end of the year, you report earnings as follows: Transportation revenue $1 million, cash operating expenses 300,000, salaries and office overhead of 400,000 and depreciation of $4 million. So your earning according to accounting are a negative $3.7 million that year. However, you distribute money to your partners based on cash flow. Your cash flow was a positive $300,000. You have to give the partners at least 90% of it, less what is called "maintenance capital" to keep the thing running. We'll assume that will be $100,000. So that leaves $200,000 for distribution. The GP in this case gets 50% of it, so the $100,000 is divided up among the people who bought limited partnership units. So there's a case where earnings and distributions don't have much to do with each other.

      When you get your check, the GP has to tell you whether all the money you're getting is from true profit (excess of cash in over cash out) or if they're giving you part of your equity back because for whatever reason the cash flow from that year's business wasn't enough to cover the distribution. If they give you back some of your own money, you've liquidated a part of your ownership already so your basis remaining is lower. If you got $100 from the MLP and $80 is labelled "return of capital", you got back part of your original investment. So when you sell out at some future date, you're basically selling your remaining interest in the partnership that they haven't already paid you back for. The IRS says they won't tax the money returned to you until you actually sell out, hence the capital gain (if your units are worth more than you paid). You basically are paying taxes as though you were running the business yourself since the items of income and loss are passed through to you without changing their character. Interest expense incurred by the partnership is counted as passive interest expense to you, and may trigger AMT issues if the amount is high enough, for example.

      So, if the GP sells that pipeline in Year 3 and its basis is now $20 million less $12 million in depreciation, you got to deduct your share of the depreciation on your taxes during Years 1 thru 3. But, if some of it was considered "accelerated" for tax purposes, the partnership will probably have to pay tax on part of the depreciation it got to deduct and, you'll pay tax on your share of that. Same thing with capital gains and so on.

      If you're really a glutton for punishment ;) the partnership files Form 1065. You can take a look at it and see how the numbers are crunched to get the K-1 items.

      When it comes right down to it, these are like a variable annuity. You put up a certain amount of money up front and will get back whatever they choose to give you.

    • I would advise anyone to use TurboTax Deluxe. The
      1st year I tried TurboTax I tried the cheap model
      & I never could get it to accept all my data. So
      I filed for an extension & did that year by hand. The last 2 years I have used Dellux with good
      results !! No late filing & the IRS accepted my
      filing !!!

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