If you have contributed property with a built-in gain or loss during the tax year, the partnership will check the “Yes” box. Also, the partnership will attach a statement showing the property contributed, the date of the contribution, and the amount of any built-in gain or loss. A built-in gain or loss is the difference between the fair market value of the property and your adjusted basis in the property at the time it was contributed to the partnership. If you contributed more than 10 properties on a single date during the tax year, the statement may instead show the number of properties contributed on that date, the total amount of built-in gain, and the total amount of built-in loss.
The partnership is providing this for your information. Contributions of property with a built-in gain or loss could affect a partner's tax liability (in matters concerning precontribution gain or loss, and distributions subject to section 737), and may also affect how the partnership allocated certain items on your Schedule K-1. For information on precontribution gain or loss, see the instructions for box 20, code W. For information on distributions subject to section 737, see the instructions for box 19, code B.
bobcvn, I have same question. Hope someone can answer:
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?
"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 the 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 built 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 transaction), we are required to attach an informational statement to the K-1".