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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: research1234 who wrote (66605)	2/21/2021 1:14:15 PM
From: Elroy	Read Replies (1) \| Respond to of 78817

if a MLP is sold from a taxable account, the accumulated distributions get taxed at ordinary rates. My understanding is the distribution lowers your unit cost basis, so the capital gain (if there is a gain) on the MLP unit sale would be larger when you sell an MLP that has paid out lots of distributions AND appreciated in value. Myself ... I am happy to pay high taxes because it means I am making lots of money. It's much better than avoiding high taxes by not making any money. Yessirree.

To: research1234 who wrote (66605)	2/21/2021 1:32:11 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78817

Not sure about ordinary income rates at time of sale for MLPs. If the MLP distribution is a return of capital (as with pipeline company mlps sometimes for example), then those cumulative distributions are used to reduce cost basis. So if the MLP is sold, the difference between that adjusted cost basis and the sales price is the capital gain (assuming there's a gain). And that capital gain could be long-term or short term. Depending on which it is, the appropriate tax rate would apply. That is, the tax rate wouldn't be at ordinary rates (for long-term sale). I believe this to be correct, but I'm not entirely sure. As regards UAN, I don't know if the distributions or a portion of them would be considered return of capital. If they are not considered a return of capital, I don't know how the taxes play out. While it might be important to know, for me, my UAN position will be small, and I won't worry about taxes that may have to be paid at a future time.