Interesting discussion on "lot selection" in MLP sales, but confusing. Let me throw a monkey in the wrench on this, and get your take. A few years ago, the IRS changed the way MLP unit sales are reported by default, to unified basis in the total partnership interest, Ruling 84-53. From my understanding, when "Reporting a Partial Disposition of an Interest in the Partnership", the units sold are not treated like a block of stock would be handled, either first-in, first-out, or by identified block. The IRS considers that a partner has a unified basis in the total partnership interest, and that a partial sale of the total interest represents a partial sale of each portion of the interest acquired in separate transactions up to that point.
To determine the adjusted basis of the sold units, the total original basis from all purchases would be pro-rated, per the percentage of the total holding sold, to get the original purchase basis of the sold units. Then, the cumulative adjustments to basis value supplied by the partnership would be used to determine the adjusted basis of the sold units. From that point, the sales proceeds and the ordinary gain as reported by the partnership would be used as described preceding.
Are you certain investors can still use "specific lot" selections in MLP sales at the broker level, and match them and thru the K1? Thanks
