USO is an Exchange Traded Fund (ETF) which is organized as a partnership. When you own shares in USO, you are considered as a partner and receive a form K-1 representing your distributive share of the income of the partnership. You have to enter this form K-1 on your tax return. The income is taxable.
To avoid being taxed twice on this income, you add this income to the cost basis of your USO and have to adjust the cost basis when you sell these shares.
