Generally that means in order to collect the 10 cent dividend that TRN is paying on 10/31, you had to own the stock at the close of business on 10/9 (the business day prior to the ex-dividend day)
You are supposed to file a return in any state where your net income is greater than the filing threshold. Buts its not that simple. Some states allow a deduction for Intangible Drilling cost and Depletion (like Federal taxes) while others do no). On my VNR K1 the biggest amounts of income were in OK and CO (approx. 20 cents/unit in OK and .15 in CO) and that's before any allowance, if applicable, for depletion and IDCs. Last time I looked the filing threshold was $1K of income from OK sources so unless you owned more than 5000 units you probably were not required to file in OK but everyone's K1 is different so don't take this as tax advice for your situation. Also, your residence state (assuming it has an income tax) will usually give you a credit for taxes paid to another state but its a complicated subject and involves lots of paperwork.
My biggest problem is the Federal tax; I've owned VNR since 2008 and more that 50% of my distributions are taxable. On the other hand, that means my basis is not dropping much; so the tax bill upon sale will be less than for some other MLPs.
Are you sure Box 14 is filled in? I've not seen an SDR K1 but I do have one from Permian (PER) which is organized the same way where income is classified as Interest and Royalties (although it comes from Texas). I don't really see how those could be classified as SE income. And probably somewhere around 75% of the distributions are effectively taxed because of the depletion, etc so you may get money back if you reported them originally as non-qualified dividends and file an amended return which you should do.
B is correct; you add the basis adjustment to the cost (but adding a negative is in effect subtracting)
Cost + Basic adjustment = basis
6000 + (-2000) = 4000
Sale proceeds - basis = total gain
10000 - 4000 = 6000
total gain - ordinary gain = cap gain/loss
Ordinary gain goes on Form 4797; cap gain/loss on Sched D via Form 8949
If you're unsing Turbo Tax, be careful; they've changed the input of this stuff
Although the 2013 tax booklet is not yet available, it appears the depletion factors for 2013 have been entered into the online depletion calculator at the PBT website. However when I enter a lot that I sold in March 2013, it comes back with negative depletion for the Waddel Ranch oil properties and positive depletion for the others. That doesn't make much sense to me. Anyone have an opinion on negative depletion?
Also depletion is about about 1/3 less than last year. At one time PBT produced a net loss as depletion exceeded income but that is no longer the case. The depletion calculator is a good tool and makes it easy to calculate depletion (assuming it is working ok)
I'm puzzled as to why you think your LNCO dividends are tax-free. LNCO dividends as I understand it are 100% ROC and therefore lower yout basis. Not much different than LINE except of course your profit in LNCO will be all taxed as LTCG while some portion of the LINE profit will be ordinary income. The fact that you are in the 15% bracket and pay no tax on QDs is not relevant in the case of LNCO.
Anyone get the 1/15 interest payment? Mine usually shows up like clockwork but nothing yet. I did "tender/consent" those shares. Oddly enough I bought more after the offering came out and did not tender those since I was past the "record date" . I DID get the interest payment for those yesterday.
Let's not forget that only about 30% of VNR distribution is tax deferred. The rest is taxable as ordinary income due to large amount of operating earnings pass through in K1 Box 1 (even after depletion, etc). On the other hand, the tax hit upon sale is significantly less than other MLPs
They're taxed like an MLP (which means they are tax deferred until you sell your interest as long as your basis is greater than zero) However since this taxed like an MLP, they will also pass through taxable interest and Royalties on a K1 (which is effectively taxed as ordinary income) and which will be partially offset by depletion.
Royalty Trusts typically do not generate UBTI. They collect royalties which are not UBTI. MLPs that operate a business can produce UBTI but most (but not all) have enough depeciation, etc to actually have negative UBTI. AFAIK the income passed through on the K1 for last year for the SandRidge Trusts (PER, SDR, SDT) was classified as interest and royalties; thus no UBTI. You are correct that a 990 return is normally required (and filed by the Custodian) if your IRA receives more than 1K net of UBTI.
Thought I posted this last nite but it hasn't shown up so I'll try again. Most Royalty Trusts don't operate a business so UBTI is not an issue. Last year CHKR passed through two kinds of income on its K1 to unitholders; interest and royalties (neither of which counts as UBTI). After a small allowance for depletion, about 50% of the distribtuions were effectively taxed. Not like your typical MLP reporting on a K1.
Where did you get the idea that step-up rules apply to IRA accounts? Absolutely not true. All holdings in an IRA lose their "character". For example if you made the mistake of holding muni bonds in your IRA, the interest would be taxable when you withdraw it; just like all other withdrawals from an IRA that are taxed as ordinary income (assuming you took a deduction when you made the IRA contribution.).
There is no step-up in basis for IRAs. In fact the only time an IRA has "basis" would be if you did not take a deduction for it because you are over the limits for a dedictible IRA or are covered by a retirement plan at work. Otherwise the basis is $0
As an aside to the originl poster, VNR is one of the few MLPs that generates substantial operating income (otherwise known as UBTI) and anyone holding more than say 500 units of VNR should probably have their IRA custodian file a 990-T return and pay some tax.
Generally in an RT, your basis is reduced (but not below zero) bu any depletion you claimed or should have claimed. Upon sale, the depletion is recaptured and taxed as ordinary income BUT only to the extent of gain as I understand it.
So you buy an RT for $20 and take $10 of depletion and sell it for $40. Your gain is $30 ($10 at ordinary income rates and $20 as CG
you buy at $20, take $10 of depletion and sell for $8 You have a $2 Cap loss.
you buy ar $30, take $10 of depletion and sell for $25. You have a $5 gain taxed as ordinary income.
Other opinions are welcome.
A couple of points:
1. UAN reported UBTI of approx 40 cents per unit in 2011 which was a partial year of operations. That means approx 2500 units would put you over the $1K limit.
2. You're correct that basis is reduced by distributions received (and also increased by operating income ie. the 40 cents). However some of that gain upon sale (sale proceeds - basis) will be taxed as ordinary income due to recapture of depreciation. Unfortunately its difficult to predict how much
Your total cost basis does not change but your basis per share does. Its the same if you buy 100 shares of a stock at $100, and it splits 2 for 1; you then have 200 shares with a total basis of $10000 (unchanged) but your per share basis is $50. For tax accounting, KMR distributions are just like mini stock splits.
Distributions are always tax deferred as long as your basis exceeds zero. However PER and CHKR (and probably SDR and SDT) also pass through interest and Royalties which ARE taxable as ordinary income.The net result is for CHKR approx 1/2 the distributions were effectively taxed in 2011. PER distributions were approx 85% effectively taxed.
According to the final Prospectus 73% of production (79% of revenues) are hedged thru March 31, 2015.
(Iinterestingly enough the preliminary prospectus said thru Mar 31, 2016)
However that won't make much difference if the price of oil tanks and people vacate the energy sector for greener pastures