So I have a question for the dividend investors. At the present I own KMI which I am happy with. I am thinking of adding an LP to my port but want to know how difficult an LP is for tax purposes. Anybody out there do their own taxes and own an LP? I use HR Block software. Is it pretty straightforward after you get the K-1 paperwork from the company?
Thx for any help
Long KMi
Randy
I have stayed away from them because I was worried that you would have to file taxes in every state they operate in. But maybe I am wrong.
That sounds like a good question for the Tax Strategies board.
Keep in mind if limited partnerships are in an IRA their payments are UBTI (unrelated business taxable income). If over $1k tax filing is required and custodian can threaten to file for you and charge your account.
I have not used them recently but a while ago you can file using H&R Block software. Usually they provide a detailed tax package that tells what number to put on each line. The payments are taxable income but you are allowed to deduct expenses and items like oil depletion.
Delays in getting the tax package can be the biggest negative.
Hi @pauleckler and @CMF_BigECat,
This is COMPLETELY Incorrect!
The K-1 lists all the various types of payment from Return of Capital, Interest, normal Income, etc.
Block 20-V is for UBI. It will have an entry only in the event that the partnership had income that was unrelated to their normal line of business.
The ONLY example I have seen was a pipeline operator that leased a bunch of extra pickup trucks while doing construction of a new segment. They finished with most of the trucks early and decided to rent them to the construction company who needed some. That became a $0.05 per share UBI, IIRC.
One year I had a $0.01 per share on either Kinder Morgan or Enterprise Partners. The cause was not listed.
The filing criteria at that time, 10 or 12 years ago, was $1,000 or higher of UBTI.
This is a problem with some, but only if held in a taxable account. I received some as late as August.
I have not held any MLP/BCD/LP/etc units since 2016. I initially bought them for higher yields. Since then, I expanded our dividend payers to the point that they provide more than enough cash for expenses.
On the state tax thing: For the units held in our taxable account, I checked the various states listed in the packet and calculated my “income” in each state. They were all below the minimum filing threshold.
However, I did not have a lot of these in our taxable account. If you plan on buying a lot of units in taxable, you might go to the LP’s website and look at the last few tax packages if available. There you can see exactly what they have done in the past.
Does that help you?
Gene
All holdings and some statistics on my Fool profile page
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We had quite a discussion of these on the old board. BP Prudoe, Mesabi Iron Trust, and Sabina Royalty Trust are the ones I had. Not sure which of them is still around. Most shared profits from a specific asset for a specified period of time or until income fell below specified amount. Then asset returned to sponsor. Mesabi Iron Trust was owned by Cleveland Cliffs.