Hypothetical: i bought clmt 2 years ago for $100 a share. i recieved, in those 2 years, $25 per share in distributions. i sell tomorrow for $200 a share.
Question: do i have $125 per share in business income to account for or do i have $25 per share in business income and $100 per share in long term capital gain income.
in other words, i understand that distributions are not taxable dividends and instead reduce the basis in your stock, the recovery of which is taxed as regular income, but what about the amount of basis that is not due to distrubitions -- can one claim long term cap gains on that?
You have to use what is on the K-1 sales schedule. It's really pointless to do these what-ifs as the rules are complex and the guidelines I have suggested in another thread are only approximate. The bottom line is that when you sell, the MLP will provide to you a K-1 sales schedule which tells you the basis adjustments and ordinary gain amounts. You have to use those numbers whatever your own estimates tell you.
That means you don't know the tax hit till after you sell. However if the MLP in question is one hosted on taxpackagesupport for the K-1s, there is a tax calculator which knows your holdings (albeit only updated once per year, so may be out of date for recent purchases) - you just tell it how many units you're thinking of selling and it will give you an estimate for the basis adjustments and the ordinary gain amounts.
In answer to your specific question, there is not enough information to attempt even an estimate. Your basis is changed not only by the distributions, but also by other incomes and losses which flow to you via the K-1. For example, in general positive numbers in boxes 1-11 on each K-1 server to increase your basis (since you pay tax on them already in the year you get the K-1) and negative numbers decrease the basis. Then if you have passive loss carryovers (due to being unable to offset passive losses in one MLP against another), they also get recaptured at sale time and offset some of the basis reductions. There is a rough explanation on the naptp website but bottom line is that it is reported to you on the K-1 sales schedule and you have to use those numbers, not your own calculations.
actually, my question could be boiled down to this: is there ANY situation at all in which ANY PART OF THE GAIN from the SALE of clmt could result in a long term capital gain. that in a nutshell is what i'm after. thanks.