Depends where it winds up on the K1. If its in Box 18A, that would be tax free interest for Federal purposes. However, it might still be taxable for State purposes when received. Perhaps someone can tell us what's on the K1?
My understanding is Interest is not considered UBTI so if that number is in Box 5 of the K1, you should be ok. Box 1 might be a different story. You can also check Box 20V.
RMD calculations have nothing to do with the K1 but are calculated based on the previous year 12/31 combined balance in all your IRAs (Traditional. SEP, etc). The "4 percent" does go up every year. For example if you are 70 in the year you take your first RMD, you divide your balance by 27.4 (3.65%), the next year you divide by 26.5 (3.77%), the next year you divide by 25.6 (3.9%) and so on. In the year you are 80, you divide the 12/31 balance by 18.7 (5.35). There are lots of calculators on the Web to help with this.
Be sure to enter the numbers in Box 13J (Intangible drilling cost) and 20T1 (depletion). However I'd be surprised if HRB supports those codes. Turbo Tax is by far the best retail software for handling MLP K1 forms
I'd want to check before doing that and estimate how much ordinary income would result from depreciation recapture on a sale of units. Unfortunately the folks who produce the K1 forms don't tell you that. You may have a large capital loss but unless you have cap gains to offset, that won't be of much use (other than 3K used against any income.)
The distributions are technically ROC (as long as your basis is greater than zero). PER may be labeled as a Royalty Trust but for tax purpose it is a partnership. Partnerships are pass through entities meaning they pass through items of income (For PER that would be Royalties and Interest) that go on the tax return of the unitholder, as well expense items (Depletion)that reduce that income. When I owned PER the distributions were effectively 70% taxed (as ordinary income)
SDT distributions like most partnerships are ROC as long as your basis exceeds zero. However Sand Ridge partnerships (PER, SDR, SDT) can pass through on the K1, significant amounts of Interest and Royalties which are considered taxable income. I owned PER at one time and as I recall about 70% of the distributions were effectively taxed as ordinary income due to the pass throughs. YMMV.
Who knows where this goes?. K1 says see Partners instructions but there appear to be none. Turbo Tax is looking for finer breakdown on this item if you do the "quickzoom" to enter additional codes for A,B and F. Admittedly, its a small number and probably is not worth spending a lot of time on.
The best way is probably to create a separate K1 entry into TT for OILT. You have the partnership name and Fed ID and there's no need to input Capital Account numbers. I never do. EPD been doing this for years with other LPs and its a pain.
How about when you get to be 70 1/2 and have to take RMDs. You'll have to pay tax on everything at ordinary income rates. And you may want to look up something called "UBTI" if holding in an IRA
If you take the intangible drilling costs in Box 13J and also apply the Depletion in Box 20T1 (which actually appears on the statement at the bottom of the cover letter), it should wipe out the number in Box 1. Hopefully you're using Turbo Tax. Of course all that lowers your basis (as do the distributions) so that when you sell you'll have more gain. (at least on paper)
There's no way the broker can track your cost basis as all the K1 items effect it. For most folks the capital account is a good estimate of cost basis as long as its positive. Folks should also look at the gain/loss calculator which is available on the K1 site.
Surprised no one has mentioned the K1 is out. Owned VNR since 2008 and this is the first year I don't have any taxable income from it. Of course that just means more tax when I sell. No UBTI either for folks holding in an IRA
You guys need a basic MLP tax course. Distributions LOWER your basis (so do operating losses, depletion and intang drill costs). Operating income increases your basis. When you sell, your adjusted basis is subtracted from sale proceeds to get total gain. The MLP will tell you how much is taxed as ordinary income (due to recapture of depreciation, depletion, etc). The balance cap is gain/loss. The key is there is almost anyways ordinary income which cannot be offset by the cap loss.
LNCO is not an MLP - it pays a dividend that will probably be ROC. That means not taxable but received but it also lowers your basis. However when you sell your gain is all Cap Gain - no ordinary income
Sorry, that's incorrect. When you sell, you can use specific id to pick any shares you wish. However if you sell ANY shares at a loss, and purchase replacement shares in either the 30 day period before the sale or thirty days after the sale, you have created a wash sale. You don't get to take the loss at that time but can use the loss to increase the basis of the replacement shares meaning the loss will be delayed until you sell the replacement shares
On the K1, take the number in Box 1 and subtract from it the number in Box 13J and the number labeled 20T1 on the bottom of the State Schedule. If the resulting number is negative, you most likely owe no tax except on the interest of $95. If the number is positive, you can deduct any prior year unallowed losses (for the same MLP) to reduce it to zero.