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Calumet Specialty Products Partners LP Message Board

  • cuerpoviejo cuerpoviejo Jun 29, 2011 3:39 PM Flag

    Tax Liability

    Assuming the 8.8% cash distributions - is that mostly return of capital? If so, does that mean after approx 10 years you have received 100% of basis back and therefore future distributions are taxed as ordinary income?
    And then if you sell it for what you paid - the entire amount is capital gains?
    It seems that once you buy it you own it for life because of the tax implications if you sell.
    Any tax experts out there?

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    • thanks hweedle.

    • Found this:

      so when you basis goes to zero, its much like what happens if you bought a stock on a stock exchange and for some reason over time they gave your more return of capital money than your original basis, additional return of capital is taxed as capital gains. Now you can find for many MLPs that they will have income items on their K-1 that will be taxed as ordinary income (like line 1 business income or non-qualified dividend income etc), but then you have to adjust up your tax basis for the ordinary income your reporting on your 1040 from your MLP K-1.

    • Thanks for the instructions on finding the tax calculator. Very good for calculating tax liability if you sell today.

      However, part of my original question remains unanswered:
      As a long term holder, the basis will eventually reach zero as you receive distributions (which are mostly return of capital). When that happens and your basis is zero, are future distributions taxed? If yes, are they taxed as capital gains or ordinary income?
      Thanks in advance.

    • Look very closely at each message link in the message tree and you will see this is the FIRST post in which I've responded to you!!

      My first and second posts responded to irbbping, my third responded to olefools question and my fourth post responded to winmantoo who incorrectly posted that the $1000 taxability trigger was NOT for the total of ALL MLPs but for EACH MLP.

      My reply to him cited both the IRS reg section and link as well as the IRS 990-T instructions with link.

      Not one of those four posts were replies to anything you may have posted!!

      Suggest checking your facts before you jump off the deep end. I also appreciate your reminder as to why over the years I abandon Y every time I have come back for a bit.

      LTBH

      PS it appears other posters had no problem understanding you were replying to the wrong person.

    • I'm responding to ltbhdollars...he basically called my post as being incorrect...which it was not...presupposing you read my earlier posts.

    • It appears you are responding to the wrong poster and should be replying to either winmantoo who posted incorrect info or the two guys asking all the questions.

      As for reading posts, it seems ltbhdollars has posted detailed and accurate info all along.

    • Dude...if you looked at my earlier postings above I cited the deduction ($1000). Folks, here is a perfect example of a know it all who fails to read the complete word. EVERYONE, LOOK AT MY EARLIER POSTS. Again, it does not matter if you have a trad or roth ira; if your ubti earnings are over $1K (annual total...for all MLP's), you will have to file taxes DIRECTLY OUT OF YOUR IRA. Further, my research indicates a MINORITY of CPA's KNOW ANYTHING ABOUT UBTI OR MLP'S!!!!

    • sorry, i now understand that you were referring to a previous post.

    • unless i missed something there is no website posted. below is another interesting website.

      https://spreadsheets.google.com/spreadsheet/pub?hl=en_US&hl=en_US&key=0AuxvUxe21v-8dGh3Y2pYMnNTYjhreDdtSTZRME1uM2c&output=html

    • The actual tax liability is not that easy. When you sell, the K-1 will reflect the sale and then caclulate your gains or losses. I have held my shares since the IPO and at December 2010, about 83% of my gains were ordinary, 17% were capital plus there is an AMT adjustment. Most likely have to do with the depreciation recapture. To get an estimate as of 12/31/10 go to the CLMT website and click on the investor relations tab. Go to the K-1 information, you will have to register but after doing so, there is a projected gain or loss calculator that you can use. I was a little surprised at how much was ordinary but then again we haven't been paying any real taxes on the distributions. Remember this is not a dividend but a distribution of earnings/equity. Those earnings are income.

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