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
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.
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.
So how are you handling the pass through situation with ETP? We don't get starting & ending capital for the sub K1s ..
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.
Do you check the box that this is the Final K-1 for SXL on the 2017 return?
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.
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?
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.....)
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?"
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, ...
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.
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?
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.
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?
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.
Thank you for the great explanation above regarding the K-1s for ET & ETP. I had a similar concerns and this will help in entering the information. Question: The ET K-1 shows a built in gain due to the ETP to ET exchange. How is this built in gain reported in system (if at all).
What happens with the liabilities for ETP that I've been including in my partner's basis? Does the change from $25k in liabilities in 2017 to $0 in liabilities in 2018 become income for me if I don't have enough basis to absorb the $25k?
@tyhunt56: I didn't have to deal with this particular issue this year (I have ET, but didn't have ETP earlier in the year), so I didn't personally see this issue. What line / where is it being reported? I may be able to figure it out. Otherwise, its probably worth asking as a standalone question.
@loritaka: This is worth posing as a separate question. Since ETP was absorbed by ET, you're ending 2018 basis is whatever is shown on your ET K-1. If you've been making entries to keep your basis at 0, then you'd continue to do so. But there's also the question of what entries, if any, may be needed for the ETP to ET transfer (which depends on what basis was transferred) and that's something I don't know.
The built-in gain box is checked "Yes" in Part II of the new ET Schedule K-1. Also, there is a separate statement in the K-1 package that lists FMV of ETP units, Tax basis of ETP units and the Built-in Gain value (1k). The IRS instructions reference box 20 code W (Pre-contribution gain/loss) and box 19 code B (Distribution subject to section 737). However, it is worth noting that on my K-1 both box 20 code W & box 19 code B are blank. So maybe there is nothing to do? Thx for reviewing.
@tyhunt56 I try to only comment on stuff I've had to research / deal with myself, and this is outside of that. I do know that stuff that doesn't appear directly on the K-1 (e.g., Sales Schedules) must still be dealt with at tax time, so its very possible that the info on that extra statement must be entered somewhere. Three suggestions: 1) I always make sure I can duplicate the math that goes into the MLP's capital calculation. That tells me which items they're giving me are sources of income, which are deductions, and which aren't tax related. So if you can figure out whether that $1k was part of the math for your capital calculations, you'll know if its taxable. 2) Googling on the boxes sometimes surfaces things. And 3) There's always asking about it specifically on this thread. Sorry I can't be more help.
@nexchap Thank you for reviewing the question and your suggestions.
I am equally confused on the additional page Energy Transfer (ET) included in the Tax Package for the ETP to ET transfer. It is titled "Built In Gain/Built In (Loss) Statement." It states "On October 19th, 2018 you contributed your ETP units to Energy Transfer LP ("ET") in exchange for ET common units. An asset contribution to a partnership would result in a built in gain or (loss) to be recognized by the partner as the units are disposed. The tax basis reported below is based on information provided to the Partnership by you or your broker, or the amount used to determine your share of allocable gain or loss."..."This statement is provided by the Partnership to report the built in gain or built in (loss) generated by an investor's exchange of property for ET units."
Gives 3 entries: "Fair value of contributed ETP Units" and "Tax Basis of Contributed ETP Units" and "Built in Gain/Loss".
My question: Is this reportable on 2018 taxes or is this to be used when sold in future?
I got an answer from ET regarding my question above: Got the answer from Energy Transfer in written form and on the telephone):
"The built in gain schedule in the ET tax package is informational only. If you look on the K-1 itself, you'll see a Box "M" that asks whether or not property with a built in gain or loss was contributed to the partnership during the year. For all of the legacy ETP partners that held through the ETE/ETP transaction, the form of the transaction was a contribution into ETE by all of the public ETP partners of their ETP units (i.e. property and not cash) in exchange for ETE/ET units. Since virtually every ETP partner would have had a difference in the value of their respective ETP units versus their adjusted tax basis, virtually every partner is deemed to have contributed property (i.e. ETP units) with a build in gain or loss (i.e. the difference in the FV of the ETP units immediately before the transaction and the adjusted tax basis of the units). If Box "M" on the K-1 is checked "Yes" (which it should be for virtually every former ETP partner that participated in the ETE/ETP tranasaction), we are required to attach an informational statement to the K-1."