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Strategies & Market Trends : Value Investing

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To: Elroy who wrote (78631)

11/30/2025 4:44:28 PM

From: E_K_S

Read Replies (1) of 78748

I will have to look at the K1 when they send it out.

I bought 130 shares of the NGLpB earlier this month. It looks like 10% of the distributions is taxed as ordinary income and 90% ROC so tax deferred until you sell.

Plan is to hold these for years, pay the 10% tax each year. (The issue is if I get the K1 in time for my Tax return filing due April 15).

Also, the ROC I must keep track from my K1 since the broker does not get notified of the new cost basis each year. However Turbo Tax does keep track of the new basis from the K1 reports I import into the software.

Note: The ROC is "deferred" until you sell the units. ROC is Recaptured as Ordinary Income

When you sell your NGL-PRB units (after holding for more than one year), the gain is categorized into two distinct parts:

Gain Component	Definition	Tax Rate
Long-Term Capital Gain (LTCG)	The gain that results from the appreciation of the unit's market price beyond the original purchase price.	Preferential LTCG Rate (0%, 15%, or 20%)
Ordinary Income Recapture	The gain that results from the cumulative reduction in your cost basis due to the ROC you received over the years.	Your highest marginal Ordinary Income Rate (Up to 37%)

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May be a better hold in an IRA/ROTH but you might have UBTI to deal with.

My conclusion - Just stick to qualified dividends in the taxable account; if you also get growth even better.

I have been building a positiion in Clorox Company (CLX), pays a 4.5% qualified dividend and looking at a possible +44% reversion to the 5 year mean in 18-24 months.

That would result in a +48.5% gain made up of 4.5% qualified dividend and long term gain of +44%.
and taxed at Preferential LTCG Rate (0%, 15%, or 20%)

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