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dwickizer
New Member

I RECEIVED K-1 FROM SPECTRA ENERGY. IT WAS BROUGHT PRIVATE BY ENBRIDGE SHARE FOR SHARE, & CASH IN LIEU OF SHARES. DID THIS END THE PARTNERSHIP?

 
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TomYoung
Level 13

I RECEIVED K-1 FROM SPECTRA ENERGY. IT WAS BROUGHT PRIVATE BY ENBRIDGE SHARE FOR SHARE, & CASH IN LIEU OF SHARES. DID THIS END THE PARTNERSHIP?

Yes.  From the "Certain U.S. Federal Income Tax Consequences of the Merger to U.S. Holders of SEP Common Units" portion of the S-4 that you received.  (https://www.sec.gov/Archives/edgar/data/895728/000119312518320953/d626174ds4a.htm#rom626174_104:(

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Tax Characterization of the Merger

The receipt of Enbridge common shares and cash in lieu of fractional shares, if any, in exchange for SEP common units pursuant to the Merger should be a taxable transaction to U.S. holders for U.S. federal income tax purposes. In general, the Merger should be treated as a taxable sale of a U.S. holder’s SEP common units in exchange for Enbridge common shares and cash received in lieu of fractional shares, if any, received in the Merger. The remainder of this discussion assumes that the Merger will be treated as a taxable transaction.

Amount and Character of Gain or Loss Recognized

A U.S. holder who receives Enbridge common shares and cash in lieu of fractional shares, if any, in exchange for SEP common units pursuant to the Merger will recognize gain or loss in an amount equal to the difference between (i) the sum of (A) the amount of any cash received, (B) the fair market value of any Enbridge common shares received, and (C) such U.S. holder’s share of SEP’s nonrecourse liabilities immediately prior to the Merger and (ii) such U.S. holder’s adjusted tax basis in the SEP common units exchanged therefor (which includes such U.S. holder’s share of SEP’s nonrecourse liabilities immediately prior to the Merger).

A U.S. holder’s initial tax basis in its SEP common units purchased with cash equaled, at the time of such purchase, the amount such holder paid for the SEP common units plus the U.S. holder’s share of SEP’s nonrecourse liabilities. Over time that basis would have (i) increased by the U.S. holder’s share of SEP’s income and by any increases in the U.S. holder’s share of SEP’s nonrecourse liabilities and (ii) decreased, but not below  zero, by distributions from SEP, by the U.S. holder’s share of SEP’s losses, by any decreases in the U.S. holder’s share of SEP’s nonrecourse liabilities and by the U.S. holder’s share of SEP’s expenditures that are not deductible in computing taxable income and are not required to be capitalized.

Except as noted below, gain or loss recognized by a U.S. holder on the exchange of SEP common units in the Merger will generally be taxable as capital gain or loss. However, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by SEP and its subsidiaries. The term “unrealized receivables” includes potential recapture items, including depreciation recapture. Ordinary income attributable to unrealized receivables, inventory items and depreciation recapture may exceed net taxable gain realized upon the exchange of an SEP common unit pursuant to the Merger and may be recognized even if there is a net taxable loss realized on the exchange of such U.S. holder’s SEP common units pursuant to the Merger. Consequently, a U.S. holder may recognize both ordinary income and capital loss upon the exchange of SEP common units in the Merger.

Capital gain or loss recognized by a U.S. holder will generally be long-term capital gain or loss if the U.S. holder’s holding period for its SEP common units is more than 12 months as of the Effective Time of the Merger. If the U.S. holder is an individual, such long-term capital gain will generally be eligible for reduced rates of taxation. Capital losses recognized by a U.S. holder may offset capital gains and, in the case of individuals, no more than US$3,000 of ordinary income. Capital losses recognized by U.S. holders that are corporations may be used to offset only capital gains.

The amount of gain or loss recognized by each U.S. holder in the Merger will vary depending on each U.S. holder’s particular situation, including the value of the Enbridge common shares and the amount of cash received in lieu of fractional shares, if any, by each U.S. holder in the Merger, the adjusted tax basis of the SEP common units exchanged by each U.S. holder in the Merger, and the amount of any suspended passive losses that may be available to a particular unitholder to offset a portion of the gain recognized by each U.S. holder. Passive losses that were not deductible by a U.S. holder in prior taxable periods because they exceeded the U.S. holder’s share of SEP’s income may be deducted in full upon the U.S. holder’s taxable disposition of its entire investment in SEP pursuant to the Merger.

Each U.S. holder is strongly urged to consult its own tax advisor with respect to the unitholder’s specific tax consequences of the Merger, taking into account its own particular circumstances.

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You should read the entire section in the S-4.  This might be a case where hiring a local professional could be in order.

Tom Young

View solution in original post

2 Replies
TomYoung
Level 13

I RECEIVED K-1 FROM SPECTRA ENERGY. IT WAS BROUGHT PRIVATE BY ENBRIDGE SHARE FOR SHARE, & CASH IN LIEU OF SHARES. DID THIS END THE PARTNERSHIP?

Yes.  From the "Certain U.S. Federal Income Tax Consequences of the Merger to U.S. Holders of SEP Common Units" portion of the S-4 that you received.  (https://www.sec.gov/Archives/edgar/data/895728/000119312518320953/d626174ds4a.htm#rom626174_104:(

------------------------------------------------------------------------------------------
Tax Characterization of the Merger

The receipt of Enbridge common shares and cash in lieu of fractional shares, if any, in exchange for SEP common units pursuant to the Merger should be a taxable transaction to U.S. holders for U.S. federal income tax purposes. In general, the Merger should be treated as a taxable sale of a U.S. holder’s SEP common units in exchange for Enbridge common shares and cash received in lieu of fractional shares, if any, received in the Merger. The remainder of this discussion assumes that the Merger will be treated as a taxable transaction.

Amount and Character of Gain or Loss Recognized

A U.S. holder who receives Enbridge common shares and cash in lieu of fractional shares, if any, in exchange for SEP common units pursuant to the Merger will recognize gain or loss in an amount equal to the difference between (i) the sum of (A) the amount of any cash received, (B) the fair market value of any Enbridge common shares received, and (C) such U.S. holder’s share of SEP’s nonrecourse liabilities immediately prior to the Merger and (ii) such U.S. holder’s adjusted tax basis in the SEP common units exchanged therefor (which includes such U.S. holder’s share of SEP’s nonrecourse liabilities immediately prior to the Merger).

A U.S. holder’s initial tax basis in its SEP common units purchased with cash equaled, at the time of such purchase, the amount such holder paid for the SEP common units plus the U.S. holder’s share of SEP’s nonrecourse liabilities. Over time that basis would have (i) increased by the U.S. holder’s share of SEP’s income and by any increases in the U.S. holder’s share of SEP’s nonrecourse liabilities and (ii) decreased, but not below  zero, by distributions from SEP, by the U.S. holder’s share of SEP’s losses, by any decreases in the U.S. holder’s share of SEP’s nonrecourse liabilities and by the U.S. holder’s share of SEP’s expenditures that are not deductible in computing taxable income and are not required to be capitalized.

Except as noted below, gain or loss recognized by a U.S. holder on the exchange of SEP common units in the Merger will generally be taxable as capital gain or loss. However, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by SEP and its subsidiaries. The term “unrealized receivables” includes potential recapture items, including depreciation recapture. Ordinary income attributable to unrealized receivables, inventory items and depreciation recapture may exceed net taxable gain realized upon the exchange of an SEP common unit pursuant to the Merger and may be recognized even if there is a net taxable loss realized on the exchange of such U.S. holder’s SEP common units pursuant to the Merger. Consequently, a U.S. holder may recognize both ordinary income and capital loss upon the exchange of SEP common units in the Merger.

Capital gain or loss recognized by a U.S. holder will generally be long-term capital gain or loss if the U.S. holder’s holding period for its SEP common units is more than 12 months as of the Effective Time of the Merger. If the U.S. holder is an individual, such long-term capital gain will generally be eligible for reduced rates of taxation. Capital losses recognized by a U.S. holder may offset capital gains and, in the case of individuals, no more than US$3,000 of ordinary income. Capital losses recognized by U.S. holders that are corporations may be used to offset only capital gains.

The amount of gain or loss recognized by each U.S. holder in the Merger will vary depending on each U.S. holder’s particular situation, including the value of the Enbridge common shares and the amount of cash received in lieu of fractional shares, if any, by each U.S. holder in the Merger, the adjusted tax basis of the SEP common units exchanged by each U.S. holder in the Merger, and the amount of any suspended passive losses that may be available to a particular unitholder to offset a portion of the gain recognized by each U.S. holder. Passive losses that were not deductible by a U.S. holder in prior taxable periods because they exceeded the U.S. holder’s share of SEP’s income may be deducted in full upon the U.S. holder’s taxable disposition of its entire investment in SEP pursuant to the Merger.

Each U.S. holder is strongly urged to consult its own tax advisor with respect to the unitholder’s specific tax consequences of the Merger, taking into account its own particular circumstances.

------------------------------------------------------------------------------------------

You should read the entire section in the S-4.  This might be a case where hiring a local professional could be in order.

Tom Young

View solution in original post

dwickizer
New Member

I RECEIVED K-1 FROM SPECTRA ENERGY. IT WAS BROUGHT PRIVATE BY ENBRIDGE SHARE FOR SHARE, & CASH IN LIEU OF SHARES. DID THIS END THE PARTNERSHIP?

Thank you.
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