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Linn Energy, LLC (LINE) Message Board

jrad52 241 posts  |  Last Activity: 4 hours ago Member since: Jul 25, 1999
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  • Reply to

    K-1s out tonight

    by jrad52 Mar 21, 2014 8:11 PM
    jrad52 jrad52 Mar 23, 2014 8:59 PM Flag

    Tell me how many ETE units you own and I'll tell you if I would worry.

    First, I seriously doubt that the IRS could conceivably track whatever you do. That's not a reason to ignore the rules, but if the amounts involved are immaterial, I wouldn't worry.

    The immediate issue is that you aren't supposed to offset income from from 1 MLP with losses from another. On the K-1s I got from ETE, 2 MLPs (APU and SXL) showed taxable income on line 1, while the other 3 showed losses, netting to an overall loss on the face of the K-1. So if you use the face K-1 amounts, you're doing something that isn't allowed, and the question is whether the amounts involved are big enough to worry about.

    The longer term issue is that if you own any of the underlying MLPs directly (say you also own units in RGP), you can't deduct the RGP portion of your ETE loss carryover until you sell both the ETE and the RGP units. Again, how much money is involved for you? (That's a rhetorical question, BTW; I wouldn't post my holdings on these boards and neither should anyone else. Too many nuts out there.)

    I do enter the numbers for each MLP but that's because I started doing it that way when I first bought ETE years ago (at that time, it was just ETE and ETP; then it got more complicated).

  • Reply to

    K1 question

    by circuitest1 Mar 11, 2014 6:55 PM
    jrad52 jrad52 Mar 22, 2014 3:40 PM Flag

    Technically, the tax law only requires the partnership to get the K-1s out by September 15, but with few exceptions, they try to gett hem out by the end of March.

    I think it was either KKR or FIG that bone year went on extension and my clients didn't get their K-1s until August. Both are investment partnerships, and they have to wait to get all the K-1s they are receiving before they can issue their own K-1s.

    BTW, who are you waiting for? My only open one right now is GLP. I got ETE last night, whcih was my other open item.

  • Reply to

    K1 question

    by circuitest1 Mar 11, 2014 6:55 PM
    jrad52 jrad52 Mar 22, 2014 3:37 PM Flag

    You can ignore the 8903 form. You can get a tax deduction for some of the costs your MLP incurs in the manuafcturing process (such as refining, which is CLMT's business). But my experience is (1) you rarely get a deduction (there has to be a taxable profit before certain expenses, and most MLPs simply don't show a profit); (2) even when you do get a deduction, it's subject to the passive loss rules, which mostly means it's a carryover (and a very small one at that), and (3) it's never worth my time to bother with it.

    Don't worry that the form doesn't make sense; it never does.

  • I am printing mine out now. Looks as confusing as ever.

    Funny thing - K1support has a function where they will estimate the ordinary gain portion of your gain during the year. For my ETE, the ordinary gain they showed was larger than the sales proceeds, which is nonsense. So I sold 50 units mostly to see what would happen. The ordinary gain amount was really quite small - maybe 20% of the proceeds amount (that might sound like a lot, but the units I sold were bought back in 2008, so there's more than 5 years of activity). I think they should break down the ordinary gain by underlying partnership, actually. But they don't.

    So now I just have to wait for GLP and I'm done.

  • Reply to

    K-1s

    by jrad52 Mar 20, 2014 10:32 PM
    jrad52 jrad52 Mar 21, 2014 7:49 AM Flag

    The only other one I'm waiting for is ETE, and that 1 is more understandable. ETE owned interests in 3 or 4 other MLPs in 2013 and did some transactions with ETP that must be really confusing, tax-wise. GLP has a bunch of big numbers at the revenue line, but other than that, it shouldn't be any more complicated than the other multi-state MLPs. If EPD can get their K-1s out by now, I can't see any reason GLP cannot do the same.

  • jrad52 by jrad52 Mar 20, 2014 10:32 PM Flag

    Maybe my eyesight is going, but I swear that I looked at GLP's site yesterday and it said that the K-1s would be ready no later than March 20. Tonight, it says no later than March 28. Maybe I confused the 8 for a 0 yesterday, but I don't think so. I should have saved a screen shot.

  • Most of the discussion is on SXC, but they are bullish on both names. I saw the report on E*Trade, but I think TD Ameritrade customers can also access CS reports; maybe other brokers have access to them also.

    They do mention that SXC will not guarantee the customers performance on new drop downs. I don't know if this includes the 33% in the existing facilities that will be dropped down later this year or not, but I think they won't get the guarantee. The guarantee was the biggest reason I bought SXCP, so I'll have to re-think my strategy. The drop downs pretty much guarantee a secondary by SXCP in the $ 200 million range by Q3 some time.

    They also mention their opinion that the remaining coke making facilities (Granite City, Jewell and Indiana Harbor) are lower quality assets than SXCP's current facilities.

  • Credit Suisse has a very long report out this AM on SXC and SXCP, which are mostly involved in coke making (turning met coal into coke, which is what the steel makers actually use). CS is pretty optimistic about both SXC and SXCP, but they have some comments on SXC which directly relate to their view of met coal, which would impact NRP.

    Steel is made by various processes, but the 1 process that uses coke is blast furnace (BF). This method is gradually being replaced by electric arc furnace (EAF) which uses (surprise, surprise) natural gas as fuel. The US coke making industry currently has a capacity of 19.5 MM tons per year, and produces about 17.5 MM tons. 4 MM tons of the capacity is scheduled to be retired soon. SXC thinks there will be a shortfall in coke availability, and is getting permits to build a new coke making facility in KY. CS thinks they are wrong; they think the shift to EAF, plus improvements in productivity in coke making, mean that there will be no shortfall, and maybe there will be surpluses. So they would rather SXC buys existing coke-making facilities rather than building a new one.

    The “build vs buy” issue has nothing to do with NRP and met coal. But CS says (1) the same environmental issues that are pressuring coal-fired utility plants are affecting the BF vs EAF discussion. Also, cheaper natural gas is causing coke makers to use more nat gas as opposed to coal. And finally, EAF technology improvements are allowing those furnaces to produce higher quality steel than they could previously. So long term, lots of negative comments about BF technology, which can only hurt met coal.

    But that’s all long-term; CS focuses on those issues because SXC wants to build a new coke-making facility. For the foreseeable future, coke will continue to be used. This doesn’t mean met coal prices will recover any time soon. SXC and SXCP work on a cost-plus arrangement, so they are agnostic about the price of met coal. They get their processing fees whatever the price of coal is. In fact, SXC is now looking to dump its small met coal mining operation.

    But I hadn’t seen this kind of discussion before and I thought it was interesting.

  • Reply to

    K1s Yet?

    by bigjohnson499 Mar 17, 2014 12:36 PM
    jrad52 jrad52 Mar 20, 2014 10:14 AM Flag

    K-1s out, and NTI is nowhere near the last. ETE is still not out yet (understandable, since it owns interests in other MLPS), and I'm stilling GLP (not so understandable, but I'll check again today).

  • Reply to

    Regarding Straumins' insider sales

    by jaime9_2000 Mar 18, 2014 1:39 PM
    jrad52 jrad52 Mar 18, 2014 6:17 PM Flag

    Her timing wasn't bad, since she never paid for the $ 38 units last year. All that happened was that 5,400 units vested to her under CLMT phantom unit plan, and she was fiven 5,400 units. The $ 38 just happened to be the price the day she got the units. And she immediately gave back enough of the untis to CLMT to have the company pay her taxes in the vesting. Very small amounts in the big picture. But the recent sale is really upsetting.

  • Reply to

    Trading 3/17/2014

    by ayscuew Mar 17, 2014 10:02 AM
    jrad52 jrad52 Mar 17, 2014 10:04 PM Flag

    NRP doesn't produce any coal and it doesn't sell any coal. FWIW.

  • Reply to

    Sale of Utica Shale properties

    by jrad52 Feb 27, 2014 8:39 PM
    jrad52 jrad52 Mar 17, 2014 9:52 PM Flag

    Update - per the 10-K filed last Friday: "As of December 31, 2013, our Utica Shale position consisted of 5% net interest in a total portfolio of approximately 152,300 gross acres for a total purchase price of approximately $31.1 million. In addition, ... we funded our proportionate share of drilling costs ...for wells drilled on our acreage. As of December 31, 2013, we funded approximately $23.3 million of drilling costs." So the total investment is $ 54.4 million. BTW, the investment only started in 2011.

    Next paragraph points out the binding LOI to sell the entire JV interest to Gulfport, subject to customary closing conditions, for $ 185 million.

    So it sure looks like the gain is about $ 130 million, divided by 29 million units or about $ 4.50 per unit. The IDRs don't dilute this because they are based on distributions, not income, and RNO is not going to make any special distribution. They are going to use the proceeds to pay down debt. And planning to pay down debt means the sale is for cash so the gain should be fully taxable.

    So the good news is that the investment was a home run, and should enable the company to pay its current distribution for at least the next 3 years if the coal operations don't completely tank (or tank even more than they have to date, at least in CAPP). The bad news is that unit holders will be looking at a tax hit this year that will wipe out a good portion of this year's distribution, depending on how much of the gain qualifies for long-term capital gain treatment, and the unit holder's tax bracket (and whether the unit holder has a capital loss carryover or passive loss carryover from RNO). Interesting dilemma. Let's see what management eventually says.

  • Reply to

    K1 question

    by circuitest1 Mar 11, 2014 6:55 PM
    jrad52 jrad52 Mar 14, 2014 8:23 PM Flag

    Keep in mind, though, that the IRS has never really issued guidance on the passive activity rules and publicly-traded partnerships. Sometimes the law is clear, and sometimes we are trying to apply rules and regulations that were designed for investors in small partnerships or S Corporations, and transferring those rules to MLPs.

    So, yes, reg 1.469-4(g) says that if a taxpayer disposes of substantially all of an activity, the disposed part may be treated as a separate activity that was completely disposed, but only if the taxpayer can establish with reasonable certainty the amount of your loss and loss carryover allocated to the disposed part. So it’s not designed for a situation where someone sells 98 of his 100 units in an MLP; it’s designed for a taxpayer that owns (but is not active in) 2 related stores and sells 1 of them. But the reg. could be read to apply to the sale of 98 units because you could easily establish that 98% of your losses were properly allocated to the units you sold. I don’t think that’s the correct reading, but who knows? Also, if you purchased units in the MLP on different days, you would not have any way at all of establishing (with reasonable certainty) what portion of your losses were allocated to the units you sold – you just get 1 k-1 that shows your entire loss for the year; it doesn’t break down that loss by the units you purchased on different days. That leaves us with the law.

    And the law specifically states that you need a disposition of your entire interest in the passive activity in a transaction in which all realized gain or loss is recognized. And here is where the wash sale rules can kick in to trip people up. If you sell all of your CLMT at a loss and your wife (or anyone else related to you) buys CLMT within the 60 day wash sale period (30 days before or after your sale), your loss is not recognized. So it follows that your CLMT loss carryover is not deductible against any non-CLMT income you might have. And the IRS ruled several years back (incorrectly, in most practitioner’s minds) that the wash sale rule applies when you sell stock personally and your IRA buys the same stock within the prohibited period.

    Anyway, it’s fun to think about this. But the IRS still cannot track the passive losses without doing an examination, and even then I’m not sure most agents or examiners would know what to look for. So people do pretty much as they please.

  • Reply to

    K1 question

    by circuitest1 Mar 11, 2014 6:55 PM
    jrad52 jrad52 Mar 14, 2014 8:21 PM Flag

    I have no idea how anyone is supposed to do it. I just did a quick check and can't find my original research. I just remember that in 2008, when the law was originally enacted, it had 3 years of application - stocks in year 1 (2011, I guess), then 2 other tranches, each 1 year later. And I have a clear recollection that partnerships were in the 3rd tranche. The third tranche is now supposed to start 1/1/2016 (the brokers screamed and everything has been pushed back a year or 2. I'll look over the next few days and post if I find the specifics, or if I find that my recollection is wrong.

  • Reply to

    K-1

    by john-megjones Mar 11, 2014 12:02 PM
    jrad52 jrad52 Mar 14, 2014 2:46 PM Flag

    Company says "by March 20". My experience is that they usually leave themselves a cushion, so I would expect the K-1s to be ready a day or so before that.

  • Reply to

    K1 question

    by circuitest1 Mar 11, 2014 6:55 PM
    jrad52 jrad52 Mar 13, 2014 11:56 AM Flag

    CLMT handles the K-1 the same as all the MLPs. They don't want to get into too much instruction beyond the required minimum because (1) it will cause more people to call and ask about issues they wouldn't have thought of without the disclosure, and (2) someone will certainly sue them if their tax return is wrong; they will claim that once the MLP tried to go deeper into the instructions, they had an obligation to cover every single possibility. So MLPs just don't want to be in the business of your (or my) taxes. So the call-in people are great at partnership-level issues, like they got your buys and sells wrong. And they're good at some partner-level things, like if a partner dies during the year, and the K-1 needs to be changed to reflect that. But most of them just aren't interested in explaining too much about handling the K-1 info on your tax return. I suspect most MLPs (actually, I think the call-in people are mostly employed/contracted by Deloitte, the firm that the MLPs have outsourced the tax reporting to) instruct the call-in people not to get involved in anything beyond the K-1 itself.

    FWIW.

  • This has to be one of the stranger restatements I have seen. GLP underaccrued for RINs and other obligations each Q during 2013, but the underaccruals all reverse in Q4? I think this means that Q4 GAAP results should be spectacular, but meaningless.

    But the market certainly doesn't like the issue.

  • Reply to

    Pipeline interest.

    by sommesound Mar 12, 2014 11:59 AM
    jrad52 jrad52 Mar 12, 2014 8:54 PM Flag

    Question for you - I'm in tax season so I could only take a quick look. It seems to me that the preferred doesn't get ATLS any IDR payments. Have you thought about that?

    My point is that if they issued $ 250 MM of common (say 8 MM units) and kept the distribution at 60 cents/quarter, ATLS would automatically get some IDR payment. But my quick read of the IDR description indicates that the IDR computation is only on the common unit distribution. Since APL has not had a preferred before, there's nothing specific that I see, but the language about the IDRs only talks about distributions on the common. Have you seen anything different?

  • Reply to

    K1 question

    by circuitest1 Mar 11, 2014 6:55 PM
    jrad52 jrad52 Mar 12, 2014 8:45 PM Flag

    Again, I don't know your tax software, but keep in mind that your gain for AMT purposes will be less than it is for regular tax purposes. On the Sale Schedule (the one that shows the basis adjustments and the ordinary portion of the gain), the column at the far right will show your AMT adjustment, which should be a negative. Different software has you enter this adjustment in different places (I use a professional software package that lets me enter this through Schedule D; other packages will do it differently). At the very least, you can go to Form 6251, look for line 17 and enter the negative adjustment there. It might save you a few dollars.

  • Reply to

    Looks like investors don't like SXCP's plan

    by jrad52 Mar 12, 2014 6:22 PM
    jrad52 jrad52 Mar 12, 2014 8:40 PM Flag

    I was thinking. At the same time, SXC said that 2014 results would be in the lower half of guidance because of cold weather problems. But those problems are in SXC's own operations, not the ones that SXCP owns a piece of. Maybe today's drop was because people didn't notice the difference. I hope.

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