Does anyone own the publicly traded MLP's Energy Transfer Partners and Sunoco Logistics?

[MLP-afficionado]

ETP and SXL merged in 2017 with ETP being the surviving entity.  SXL provided a Final K-1 to me but I have been unable to figure out how to select the proper disposition in TT.  As I see it, TT provides for 3 kinds of disposition:  1.  fully taxable transaction(which it is not), 2.  Gift (it isn't), or 3.an installment sale (which it isn't).  In point of fact the terms of the merger provide each holder of SXL 1.5 shares of ETP for each share of SXL.  Additionally, SXL has a suspended passive loss carryforward which should be added to ETP's suspended passive loss carryforward, and again, TT has no method of transferring the acquired company's carryforward to the successor's carryforward.  I understand that I could manually override the successor company carryforward but that leaves no electronic trail.  Am I missing something

[nexchap · Accepted solution]

TT doesn't have an automatic method to process "my company was taken over in a stock-for-stock" transaction.  The way I've handled this is to not treat the acquired company as though it has not ended this year, and then resolve it next year:

- Fill out SXL just as though it was an ongoing entity.  You'll have suspended losses.

- Fill out ETP as normal too

- Next year, when you fill out your 2018 return, you'll enter ETP as normal and when you get to the questions about carryover losses from prior years you'll add the SXL carryovers to the ETP entries.  You can do this, and still keep an electronic record, by using the "Add Supporting Details" option for each entry you're changing.

- Finally, delete the SXL K-1 from your 2018 return.

[rilandon]

So how are you handling the pass through situation with ETP? We don't get starting & ending capital for the sub K1s ..

[nexchap]

Information only provided for the main LP (like section L, starting and ending capital) should just be entered for ETP and left blank for the others.

[armjrdallas]

Do you check the box that this is the Final K-1 for SXL on the 2017 return?

[nexchap]

No.  If you do that, TT releases all suspended losses to your return.  In this case, since those suspended losses are to remain suspended, and eventually added to ETP, its easier to leave that unchecked.  TT will leave the losses suspended.  Then, in 2018 just add the SXL losses to your ETP entries (there's a spot in the interview where you're asked about carrying over prior year losses -- handle it there) and delete any SXL K-1.

[el-Ducko]

So, here it is a year later and I've handled the carryover as described. (Good answer, by the way!) Now, ETP has pulled more sleight-of-hand and become part of Energy Transfer LP (ET), and issued K-1 packages for both ETP and ET. Part of each package contains a "Supplemental K-1 Information Statement" and both list ETP numbers.  ...but wait! The numbers are different for ETP in the ETP package versus ETP in the EP package! So, which should we use?

[nexchap]

The ETP K-1 will show the financials from Jan 1 to the date they became part of ET.  The ET K-1 will show the financials from the date ETP became part of ET through 12/31.  So when you fill in the K-1 worksheet for ETP within TT, you'll add the two together (no one ever promised that life would be simple.....)

[el-Ducko]

So in 2018 I will file the added-together numbers for ETP and the numbers for EP. Then, next year, I will add the loss carryforward for ETP to ET, then delete the ETP K-1, like we did with Sunoco, right? But what about the 2018 numbers for SUN? I thought we were to delete Sunoco for 2018. They're fairly small. Should we just "look the other way?"

[nexchap]

A lot depends on whether the FEIN has changed.  The ET K-1 has to be broken apart into 7 different TT entries (at least in my case -- 4 different MLPs, some with box 1,2 and/or 3 entries).  Each of those K-1s have their own passive loss carryforwards.  So ETP exists as a K-1 last year, this year, and next year.  So did SUN, since you're picking it up on ET.  So if the FEIN is the same, then the numbers get combined / carryforwarded forever.  If the FEIN changed, then the partnership has changed and you'd have to enter different K-1s, manually move the carryforward, ...

[el-Ducko]

UhOh! So, that means that we should NOT have deleted Sunoco and added the passive loss carryforward  into ETP? ...even though a separate K-1 package was not issued for Sunoco in 2018? This gets "curiouser and curiouser" as down the rabbit hole we go.  ...even though shares of Sunoco and ETP no longer exist. I see your point, though- -  as long as the information for each entity is reported separately, I guess we'll have to keep reporting K-1 data. I'll have to re-enter the Sunoco info information, although minus the passive loss carryforward.

[el-Ducko]

Interestingly, the Sunoco FEIN changed, plus I never had a holding in USAC (USA Compression Partners LP). ...no reason to re-enter the old Sunoco data. I have zero shares of both, so no way to sell them or realize gain/loss. Seems like I ought to be able to ignore their K-1 data. Your thoughts?

[nexchap]

I think you might be confusing SXL and SUN.  The original question was about ETP taking over, and eliminating, SXL.  The fact that SXL completely disappeared is why its passive losses were transferred to ETP, and the SXL K-1 got deleted from TT.

This year, ET took over, but did not eliminate, ETP.  ETP still exists as a legal entity, but doesn't publicly trade anymore.  That's why you'd combine the values for old and new ETP (again, assuming the same FEIN).  

SUN and USAC are both operating, publicly traded PTPs.  You may not own shares in them directly, but since ET owns a position in each of them, and you own ET, you have indirect ownership.  That's why the ET K-1 breaks their financials into 4 different pieces:  ET, ETP, SUN, and USAC, each with their own FEINs and K-1 values.  You have to maintain separate K-1s in TT, with separate loss carryovers, until you sell ET or it otherwise disposes of those positions.

[el-Ducko]

Thanks. That clears(?) it up. Oh, Joy! - - five K-1s (counting that pesky Box 3 net rental income) to enter instead of one. You are correct about my mistaking SXL for SUN. Good catch. This is really going to be fun when I sell it, figuring out the cost basis. Any thoughts there?

[nexchap]

If you do a total disposition, it won't matter since all the suspended losses will be released across all 5 K-1s.  If you do a partial, you'll have to figure out a way to allocate Ord Gain across the different K-1s -- maybe the K-1/Sales Schedule will help with that.