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Enterprise Products Partners L.P. Message Board

  • combat_medic_us combat_medic_us Mar 14, 2006 7:54 PM Flag

    Hope someone is willing to oblige?

    Im new to the whole MLP scheme and bought into this one on it's recent declines. I know there has been some discussion on the board about taxes. Can someone give me a real basic explaination about how the taxes work and what my responsibilities are at years end? Also, I was wondering what the general feeling about nat. gas prices dropping and its effect. Any other info to catch me up on EPD would be greatly appreciated.

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    • Some, although not all, of us call that the "death tax." And think getting rid of it is a very find idea, even if the "price" is a stepped-up basis at death. Just a defense of that position here, grin: capital is not a dirty word -- it creates jobs, ultimately raising more revenue. It rewards the willingness to work hard to create wealth. And, consider this: is it really fair for the state to confiscate wealth/property?

    • Chart wrote...
      Suppose you sell a MLP and die the next day. Your estate will pay taxes on the cap gains and past distributions. Someone inherits the cash.

      Suppose you did not sell, and died. Those taxes that your estate would have paid will not be paid. Someone gets the units stepped up cost basis. As I see it, you got the distributions, spent the money, did not pay taxes on it, in life or in death. Life is good.
      ===============================

      Hi Chart - I agree with your first point - when you die, someone (your spouse or adminstrator) has to file a return and settle with the IRS for any income, salary, CGs, etc for the year you die, so if you sell your LP and die the next day, your return will be figured using the adjusted basis and most of the tax will be at ordinary income rates.

      On your second point though, I still believe a Federal Estate Tax return (separate from an Income tax return) will be required and if the value of your assets exceed the minimums(which are quite high), tax will be due. (That's one of the reasons your heirs get the stepped up basis, otherwise the same gains would be getting taxed twice).

      pshonore

    • Cripes, PS, now I am completely depressed...Can't even beat em by dying.

    • Re to:PS
      "I believe when you die, your estate is valued and if you go over a certain amount, your estate will pay tax on it."

      I was not talking about estate tax, (death tax)

      Suppose you sell a MLP and die the next day. Your estate will pay taxes on the cap gains and past distributions. Someone inherits the cash.

      Suppose you did not sell, and died. Those taxes that your estate would have paid will not be paid. Someone gets the units stepped up cost basis. As I see it, you got the distributions, spent the money, did not pay taxes on it, in life or in death. Life is good.

      But I have no plans to do either right now.

      -chart-

    • Chart wrote ....
      However, under present rules, if you die, no one ever pays. The one inheriting gets a stepped up cost basis, and your estate pays nothing. You nor your estate pays until you sell. In this case you got to spend your capital and pass it along. However, if the executor of your estate choses to sell the units and pass along the cash, ZAP

      I believe when you die, your estate is valued and if you go over a certain amount, your estate will pay tax on it. (The amount is currently 2 mil I think, although you can leave an unlimited amount to a spouse). Doesn't matter if its cash, stocks, bonds, MLPs, real estate, etc. You are correct that your heirs will get a stepped up basis just as they would on stocks, real estate, etc. Of course there are all kinds of estate planning techniques to avoid the taxes. But you'll have to see a estate planning lawyer for that. By the way there is a plan in Congress to eliminate the Estate tax, and get rid of the stepup at the same time. Badddd idea for us. Also don't forget there can be estate taxes at the state level as well depending on where you live.

      pshonore

    • You then can take the accumulated loss on that years taxes.

    • Liked your example. But let me ask another question. (Have not thought this thru yet.)What happens to the deferred partnership loss which should be triggered on sale of the units?

    • Hi Chart,

      Okay, that makes sense to me. Thanks for the example using numbers. Given your example, the $200 in distributions, upon sale on the units, is taxable at the holder's income tax bracket. Additonally, the $100 difference between the purchase cost of the units and the sale price is calculated at the capital gains tax rate then in effect.

      My misunderstanding was in thinking from a prior explanation that in addition to paying tax on the $200 in distributions, given your example, an additional $300 would be taxed at the capital gain rate instead of just $100.

      According to your example which clarified the issue, indeed, no double taxation would have been paid.

      Thanks again for your help!

      dabqs

    • Re to:euro
      "You will be taxed on a yearly basis for that which isn't shielded, right?"

      Normally it is 100% but there are exceptions.

      http://finance.messages.yahoo.com/bbs?action=m&board=7082720&tid=enp&sid=7082720
      &mid=13237


      Here is the formula.
      For me ETP, EPD, APL, KMP, TPP are all 100%

      -chart-

    • Hey Chart,

      I have yet to own MLP's through tax season but your answer that you don't pay any tax on your distributions until you sell would be assuming the distributions were 100% tax deferred, right?

      You will be taxed on a yearly basis for that which isn't shielded, right? At least, that has been my understanding. Correct me if I'm wrong...

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