that is the very best discussion i have heard, and explains the difficulties mlps have in allocation. it also explains the very predictably sell off in dec each year. the most money to be made will be on taking a short position in dec. in the mlps. when i studied the data last year i was amazed at the consistency of the sell off and subsequent upswing on jan 1. thanks for taking the time. your posts are excellent. if you could give me your thoughts on the projected price by next thursday i would appreciate it.
Allocating income and various deductions to each investor is a time-intensive process. An investor's allocated values depend on exactly when they invested in the partnership (you are buying a share of the capital equipment and other assets as of that day, with a new depreciation clock and extraction-related credit starting for each appreciable asset reset that day to that day). That is enough to cause it to have to be done for each investor. But if a single investor makes multiple purchases on different days, or reinvests distributions each quarter, then the MLP accountants have to go through and determine "the 100 units they bought in April 2007 are allocated this much.....; the 50 more they bought in June 2008 are allocated ....". For a reinvesting investor it gets very tedious, quickly. Buy and reinvest for 10 years and the MLP is tracking 41 (original + 40 reinvestments) "colors" of your invested capital for you.
Each MLP has their own schedule and procedures, but by far the most common way they do things is once a month they go through the process for all outstanding units on that particular day. Thus a 'lucky' investor could buy, hold for 29 days, and then sell but never own on a day the MLP is allocating income and costs; that investor will not get anything allocated to them nor get a K-1 at the end of the year. At the other extreme, an investor could being on record as holding for one day...an allocation day...and get a K-1 with allocation for that month.
Because UBTI is calculated (by the MLP) as Income (as calculated) minus certain items not included in income, it is certainly possible that an investor may end up with $0 as reported income, and a different amount as UBTI. Furthermore, some MLPs never report a negative number; their K-1 might show $0 income because of that MLPs reporting convention, but they actually could have been allocated -$100 and had it reported as $0. UBTI can end up the same way.
Sold my LINE 39 Aug options when LINE hit 41 - got 2.10 for them. It has had a great run up and I wish 42 for all who are still in. This way if ETP goes to zero (and it has another "stellar" trading day - up almost .60 now at .11 lol) I will make a slight profit overall.
Verbal only. If I understand the issue as presented by the post from "lisahuang54" as follows:
"Here we are referring to income allocated to you from the MLP on the K-1. That doesn't mean income you actually received, but when you own units of an MLP, you are technically a partner and share in the overall income of the MLP.
Having said that, while I don't have experience with ETP K-1s, the pipeline MLPs tend to have negative UBTI due to their depreciation and even if positive you'd probably need a significant position in order to owe UBTI. E&P MLPs tend to generate much more positive UBTI so it becomes more of an issue for folks investing in the E&Ps. Nevertheless this is something to be aware of when investing in MLPs in an IRA."
I will assume that my investments are not at a level to incur a tax liability. If the IRS wishes to chase me on this issue, I believe they will have another issue with Ameratrade for not tracking my tax liability.
I thank all responders to my posts. Any ohter opinions still are appreciated.
Have lived in many places but nothing can compare to SC heat + humidity. Heat index was 118 yesterday lol. Have a triple in LINE so far ( what is your exit point there?), about 50% in KMP and minus 150% in ETP.
i yhink you are correct about holding periods. longest i held was 30 to 60 days. anyway, more imoortant here is whether etp is capable of a run to 49. i kind of think it can, but investor demand might be constrained for fear of secondary.
Here we are referring to income allocated to you from the MLP on the K-1. That doesn't mean income you actually received, but when you own units of an MLP, you are technically a partner and share in the overall income of the MLP.
Having said that, while I don't have experience with ETP K-1s, the pipeline MLPs tend to have negative UBTI due to their depreciation and even if positive you'd probably need a significant position in order to owe UBTI. E&P MLPs tend to generate much more positive UBTI so it becomes more of an issue for folks investing in the E&Ps. Nevertheless this is something to be aware of when investing in MLPs in an IRA.
Personally I keep my MLPs in my taxable account because they are already inherently tax advantaged (deferred) so I prefer to hold other investments in the IRA and thus get tax deferral in both my IRA and taxable accounts.
Ditto on the exasperation. ETP is my sole red position in this month's MLP sweepstakes. I intentionally entered a "defensive" position by using DEC calls, and it looks as though I may have to wait for the next distribution cycle. Having said that, ETP hasn't declared its dividend yet, so we may still get a little bounce in the next few days. We'll see.
I hope that you are staying cool during this massive heat wave.