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Linn Energy, LLC Message Board

  • nasteebiker nasteebiker Nov 14, 2012 12:28 PM Flag


    Does the k1s keep track of Roc? If you hold an mlp long enough at a point you will be taxed on the distribution. I believe when you get to a point where the ROC is fully distributed. Does the k1s show this? Also I heard as you come close to recapturing your full return you can buy a few more shares and that will start the clock all over again for the entire holding of the mlp is this correct

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    • Don't believe the "few more shares" myth. Once your cost basis hits zero, you'd have to buy enough shares to raise it, and that means factoring in the total year's distributions plus the distributions, if any, from the new units. Then the next year, because of compounding, you'd need to buy more yet. You'd become a big collector of LINE in order to postpone the inevitable. In my view, tax deferral is not the big IRS gift that some folks perceive it to be. Dieing, however, may be the best MLP investment strategy ,as your heirs will get a step-up in the cost basis.

      • 1 Reply to ronharv
      • Yes the K1 Reporting keeps perfect track of your basis. Turbo tax Partnerships does a good job of handling buys and sales.

        Taxes are a very significant portion of partnership valuations. Please take into consideration that the recapture of a partnership is taxed at ordinary marginal income tax rates. It is not a capital gain like occurs with a c-corp return of capital 'dividends', which all things being equal creates future capital gains.

        So you certainly do not want to shield income now only to bunch it all up into higher marginal rates in the future. So when you add the complexity of possible partial sales and taxes it is best to consider these long term investments with a kick the bucket aspect for the basis pick up.

        LNCO at a significant discount like today is clearly the better deal. Simpler, cleaner and the ROC distributions lower your tax basis. Capital gains.

        For contributions to existing positions call the K1 department. Most of the mega partnerships have excellent customer service.

        Ron^3 with his comment on tax timing clearly does not understand the nature of compounding. It matters a great deal and especially as income taxes appear to be exploding under Obama.

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