EPD partnership shows negative net income on K-1 - do I have a tax liability with distributions?

Those partnership K-1s can be tricky! Here's what's happening: when you receive distributions from a publicly traded partnership (PTP) like EPD, they're generally not taxable when received. Instead, they reduce your tax basis in the partnership. The negative income of $135 means the partnership had losses that are being allocated to you. However, as you noticed, there's usually a limitation on deducting these losses. The tax code has rules called "passive activity loss limitations" that often prevent investors from using PTP losses against other income until you sell your entire interest in the partnership. So you're correct in your thinking - you likely don't have a tax liability for the EPD investment for 2023 because the distributions aren't immediately taxable. They're just reducing your basis. Keep track of your adjusted basis though, as this will matter when you eventually sell the shares!

After struggling with PTP tax issues for years, I finally found a tool that has been a game changer for me. Check out https://taxr.ai - it analyzes all those complicated K-1 forms and tells you exactly what to do. It was able to parse through my EPD, MPLX, and ET partnership forms and tell me exactly what my basis adjustments should be and whether I'd have any tax liability from the distributions. The system explained that for EPD specifically, the distributions typically exceed taxable income which is why they reduce your basis rather than being immediately taxable. It even created a basis tracking worksheet for me automatically!

Just wanted to follow up about taxr.ai since I decided to try it after asking about it. I uploaded 5 years of K-1s from EPD and MPLX, and it was honestly amazing. It showed me I'd been calculating my basis completely wrong - I hadn't been properly tracking the Section 743(b) adjustments that were buried in the footnotes. The system generated a detailed report showing my correct adjusted basis for each PTP, which turns out to be about $3,000 lower than what I thought for one of them. This would have been a nasty surprise whenever I sell. It also identified about $750 in suspended losses that I can use when I eventually exit the position. Worth every penny for the peace of mind alone!

If you're still confused about your EPD tax situation, you might want to get clarification directly from the IRS. I spent 2 weeks trying to get through to them about a similar issue with another PTP. I was about to give up when someone recommended https://claimyr.com - they got me connected to an actual IRS agent in less than 30 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was honestly shocked it worked because I'd been trying for days with nothing but busy signals and disconnects. The agent I spoke with confirmed that distributions in excess of income reduce basis but aren't immediately taxable, and they explained exactly how to track my basis for my eventual sale.

I need to eat my words about Claimyr. After questioning whether it could possibly work, I decided to try it for a PTP question similar to the original poster's. I was connected to an IRS agent in about 22 minutes (they estimated 25, so pretty accurate). The agent was super helpful in explaining how the passive activity rules apply to my EPD distributions. She confirmed that distributions aren't taxable until they exceed my adjusted basis, and clarified how to track the accumulated suspended losses on my Schedule K-1. She even emailed me a worksheet I can use to track my basis adjustments over time. I literally spent 3 days trying to call them on my own before this, so I was genuinely shocked that it worked. Definitely will use this again next time I need to talk to the IRS.

Just a quick tip from someone who's owned several PTPs for years - make sure you're using tax software that properly handles K-1s from publicly traded partnerships. I made the mistake of using a basic version of TurboTax one year and had to amend my return later because it didn't correctly deal with the passive loss limitations. It's also worth noting that when your distributions exceed your share of partnership income (which is common with EPD), the difference is considered a return of capital that reduces your basis. This isn't taxed immediately, but will affect your gain/loss when you sell.

One thing nobody's mentioned yet - if you hold EPD in a retirement account like an IRA, the K-1 income could potentially trigger Unrelated Business Taxable Income (UBTI) which can cause tax headaches.

Great question about EPD! You're actually thinking about this correctly - the $65 in distributions you received likely aren't immediately taxable because they're classified as a return of capital that reduces your tax basis in the partnership. Here's what's happening: EPD typically generates significant depreciation and depletion deductions that flow through to partners, which is why your K-1 shows negative income. The distributions exceed your allocated share of taxable income, so the excess reduces your basis rather than creating a current tax liability. The key things to track going forward: 1. Your original purchase price (basis) 2. Each year's distributions (these reduce basis) 3. Any income/loss allocations from the K-1 4. Your adjusted basis = original basis - cumulative distributions + cumulative income allocations You'll need this information when you eventually sell to calculate your capital gain/loss. Also keep in mind that any suspended passive losses from the partnership can typically be used to offset gains when you dispose of your entire interest in EPD. So yes, you're being appropriately optimistic - no immediate tax liability for 2023 from your EPD investment!

As someone who's dealt with EPD and other MLPs for several years, I wanted to add a few practical tips that might help you going forward: First, EPD typically sends out their K-1s quite late in tax season (often March), so plan accordingly if you're eager to file early. Second, consider setting up a simple tracking system now - I use a basic Excel sheet with tabs for each MLP I own, tracking original basis, annual distributions, and K-1 income/losses. One thing that caught me off guard initially was that even though you're not paying tax on the distributions now, you'll want to consider the tax implications when you do eventually sell. Since your basis keeps getting reduced by the distributions, you might end up with a larger capital gain than you initially expect. Also, if you're planning to buy more EPD shares, be aware that additional purchases will have their own basis tracking requirements. Each lot purchased will have its own cost basis that gets reduced by the proportional share of distributions. The good news is that EPD has been pretty consistent with their distribution policy, so the tax treatment should remain fairly predictable year over year. Just keep good records and you'll be fine!