Kadaifi wrote:
- quote -

traded companies (PTC), I will assume that this is the case.

As such, one becomes an investor by buying units in the MLP on
the open market. MLPs/PTCs typically make quarterly cash
distributions. These distributions are not taxable. They are
treated as a return of capital and reduce the investor's cost
basis. As long as the cost basis does not go below zero, there
is no current tax consequence for the investor relating to the
cash received. This is not true relative to the investors share
of the partnership income, gains, losses, credits, deductions,
etc. Remember, we are dealing with a pass-thru entity. The MLP
pays no tax. The investor gets a K-1 that describes the type of
income, deductions, etc. Based on the data on the K-1, the
investor is going to have either positive or negative partnership
income. If positive, it gets reported as ordinary gain. If
negative, it gets carried forward as a passive loss and can be
used when the taxpayer has passive income or disposes of his
interest in the partnership. Disposition of one's interest would
trigger capital gain or loss.

Please note that every MLP/PTC I have encountered in the past,
provided the investor a statement that explained how to compute
the partnership income or loss attributable to the investor.

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W wrote:
- quote -

Not true. A passive investor does not report that as ordinary income.
The income is reported as "Ordinary Business Income (loss) on Line 1
Part III of the K-1 provided by the MLP. You do not pay tax on that
income nor can you deduct it if it is a loss.

The only time you may owe tax (or get a tax refund) is when you sell the
MLP and the MLP sends you a Sales Schedule. In my case (Sale of MLP in
2008), the Sales Schedule lists 10 items of which 6 were provided by the
MLP. Using this schedule which provides you with the "Adjustments to
Basis", you can determine the amount of ordinary gain plus the amount of
capital gain/loss for the entire period in which you owned the MLP and
show the amount of ordinary gain or loss on Form 4797 - Sale of Business
Property. That amount of gain or loss is then shown on Line 14 of the
1040 - "Other Gains or Losses". Presumably, if the MLP lost money and
you then sold it, the loss would be taken on Line 14. You just can't
report the loss (or the gain) until you sell your units.

In addition to the calculation of ordinary gain or loss, the Sales
Schedule also shows you how to calculate the capital gain or loss
associated with your MLP and that is reported on Form 1040 Sched D.

FWIW, I am not a professional tax preparer so anyone please feel free to
correct me where I am wrong.

Why the double standard of
- quote -

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"DF2" <replyvia[at]newsgroup_please.com> wrote in message
news:5inft4l7djjur0babeq161m1jtn6vgoa3r[at]4ax.com...
- quote -

Yet as a passive investor, if the MLP shows positive income, you have to
report that an pay it as ordinary income. Why the double standard of
taxing gains and not allowing claiming losses?

--
W

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In misc.taxes.moderated, W wrote:

- quote -

As a passive investor, you cannot take those losses. Typically your
MLP tracks this stuff, and it gets reflected in later K-1s.

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

If I invest in a master limited partnership (MLP) that current has no
distributions, and which has a loss on its income statement, do I get to
take any of that loss against my other ordinary income, up to the basis of
my investment in the stock of the MLP? What restrictions are there are on
my ability to take the losses?

--
W

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >