Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
Limited Partnership
Posted by: b1_lee, May 8, 2017 12:57AM
I own odd shares of a publicly trade LP in my brokerage account. Each year my brokerage send 1099-DIV which consist of dividend paid by this LP and other companies.

I report gross dividend to my 1040. Each mid year this LP company send Schedule K-1 which has small interest/dividend/net short & net long capital gain, other expense & distribution, etc. Am I suppose to do anything with it? Do I have to adjust my return because of it?

Sometime, I noticed my brokerage have a few dollars of this LP label as "return of capital". Will my brokerage auto adjust it to original cost basis?

If I sell it this year, will my brokerage send details of cost basis which reflect accumulated return of capital & proceed in early 2018?

Do I just report dividend & sales gain/loss to my return in April? Do I have to do anything with 2017 Schedule K-1 to be sent in mid 2018 & any past schedule K-1?

Why LP send annual Schedule K-1? Isn't my gain/loss just base on cost basis & sale proceed?

Re: Limited Partnership
Posted by: BruceM, May 8, 2017 04:27PM
Having held several MLPs for many years, I can give you my experience, but others will need to speak to the IRS code that affect the answer to your questions.

I assume your talking about common units of a Master Limited Partnership (MLP)

I have never received a 1099DIV for MLP distributions. These should come to you on the MLPs K-1 that should be sent directly to you and not through your brokerage....at least that's how I get mine.

The K-1 will have boxes 1 through 20 showing various sources of income the MLP must pass through to you, the limited partner. Most tax preparation software, such as TurboTax, will have you input these numbers off the K-1 into TT and for many you can even do an auto download from the MLP website to TT. Your 'capital account' in the MLP is recalculated each year in box L of the K-1. However, this is not your tax basis which is determined in the year you sell some or all of your MLP units by adding back the cumulative Sec. 1245 depreciation and subtracting past cumulative losses (if any). The distributions you receive are, by definition, return of capital and are not reported on your tax return. Any earnings will be in box 1 and reported on your form 1040 as ordinary income. Any loss is accumulated and used when you sell some/all units.

MLPs are very complicated for tax purposes.There's a guy named 'Reel Ken' who posts at Seeking Alpha that has written some of the better descriptions on the taxation of MLPs.

[seekingalpha.com]

BruceM



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