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Calumet Specialty Products Partners LP Message Board

  • cowley_ed cowley_ed Mar 22, 2013 6:35 AM Flag

    Ubti

    Can anyone share from their K-1 the ubti on 1000 shares of CLMT? Ed

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    • It's very hard to say. It depends on when you bought and how much you paid. In 1 account, I owned 1,000 units of CLMT for the entire year, but then I bought a bunch more during 2012, and everything is mixed together on the K-1. On that K-1, the UBTI amount was $ 1,255 compared to $ 3,700 of distributions, or about 33%. My wife's account only bought CLMT in September 2012 and her UBTI was negative and she received 1 distribution.

      The bigger issue, which sounds dumb, is how much you paid for the CLMT. Part of MLP taxation is that CLMT computes a tax depreciation deduction based on how much you paid for your units (called the Section 754 step up), and that deduction is allowed for UBTI as well as regular tax. So my original 1,000 units were bought at $ 18.50, and the tax depreciation deduction is presumably fairly small, so the taxable income on the K-1 is relatively high. My wife's units were bought at $ 32, and her K-1 shows the loss. My guess, and it's only a guess, is that if you were to buy in the high $ 30s, you probably wouldn't get much UBTI on a 1,000 unit purchase.

      But that isn't the problem - the IRS believes that when you sell an MLP, the amount reported as ordinary income is UBTI. And that could happen even if you lost money on the overall investment. That would be a killer, although they haven't done much about this so far and everyone (so far, safely) ignores the issue. But if you notice, this year's K-1 (for the first time) asks if the partner is an IRA. So I'm guessing the IRS is starting to get its act together.

      • 2 Replies to jrad52
      • "so far and everyone (so far, safely) ignores the issue."
        None of this stuff makes any sense to me whatsoever. And again, when I talked to the people at my brokerage (one of the largest)..they knew nothing about this and they are in the financial business. If the brokerage is theoretically responsible to handle this...and all they tell you is 'talk to your tax advisor'..which is nonsense...there is little to nothing that an individual can do, especially given the small about of time between when taxes are due and when you actually receive the k1..maybe a few weeks or so. More irs bunk.

      • Thanks for the information. Myself, I have only modest positions in CLMT, LRE and NGL. K-1's will not be an issue what so ever even if I triped those positioins. I have mitigated K-1 exposure in my IRA's with shares of EEQ, LNCO, PWE, NAT and BGCP. Buying 400 shares of NAT last Friday just 2 hours before Cramer came out with a speculative "buy" was a lot of fun. The chances of that are pretty slim. Luck of the Irish. Ed

 
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