MLP Portfolio Tax Simulator

Project your MLP position year by year — basis erosion, tax, distributions, and what your heirs inherit. Every calculation cites its IRS authority.

The IRS requires partners to maintain their own basis records. Your broker doesn’t track K-1 adjustments — their 1099-B cost basis is wrong for MLP positions. TurboTax tracks suspended losses but not outside basis. No standard tool projects what your position looks like in 5, 10, or 20 years under different assumptions.

This simulator implements the IRS Partner’s Basis Worksheet (Lines 1-14, Partner’s Instructions for Schedule K-1, Form 1065) as a forward projection. Every year’s calculation maps to the official worksheet line items. You can inspect the line-by-line detail, the IRC section citations, and the exact formula for any value the tool produces.

For the full strategic context behind long-term MLP holding, read What Holding MLPs for 20 Years Actually Looks Like.

This tool provides projections based on assumptions you provide. It does not constitute tax, legal, or investment advice. Projections are estimates and will differ materially from actual results. Consult a qualified CPA or financial advisor before making decisions based on this output.

IRS worksheet methodology with full citations. Most MLP calculators use a single growth rate and ignore basis mechanics. This tool tracks each purchase lot independently using the IRS Partner’s Basis Worksheet (Lines 1-14), models §731 triggers when basis reaches zero, estimates §751 recapture accumulation, accounts for §752 liability allocation changes, and lets you override assumptions for specific year ranges. Built by a proprietary energy trader who holds these positions personally.

What This Tool Models — and What It Doesn’t

What We Model

  • IRS Partner’s Basis Worksheet Lines 1-14, per lot, per year
  • §731 gain on distributions exceeding basis → Schedule D via Form 8949
  • §704(d) suspended loss limitation and carryforward → Form 8582
  • §199A QBI deduction on qualified PTP income → Form 8995/8995-A
  • §1411 NIIT on investment income above thresholds → Form 8960
  • §752 liability allocation impact on basis (K-1 Item K → Worksheet Lines 3/9)
  • §751 recapture estimation on sale → Form 4797 (estimated, not exact)
  • §1014 stepped-up basis at death, including community property states
  • Multi-lot basis tracking with per-lot §731 triggers
  • §469(k) PTP passive activity silo enforcement → Form 8582

What We Don’t Model

  • State income tax on MLP-source income (we model filing costs, not state tax owed)
  • Alternative Minimum Tax / §55-59 (minimal for midstream)
  • §465 at-risk limitations (tracked informally; not enforced)
  • §754/§743(b) special basis adjustments (rare for large midstream)
  • SALT deduction cap interaction ($40K cap may limit deduction of state MLP taxes)
  • Actual K-1 box-level detail (we project estimates; import from K-1 Tracker for actuals)
  • UBTI for IRA-held MLPs (different framework entirely)
  • Wash sale rule enforcement on lot dispositions (we warn; we don’t block)

Every number this tool produces is an estimate based on your assumptions. Actual K-1 data will differ. The K-1 Basis Tracker processes actual K-1 data for backward-looking precision. This simulator projects forward using those same IRS worksheet mechanics.

Try a Demo Scenario

1,000 EPD units — the baseline

Enterprise Products at current rates. The most widely held midstream MLP.

500 MPLX units — fast growth

MPLX’s 9.4% distribution CAGR shows what aggressive growth does to the math.

ET after a distribution cut

What happens when distributions drop 50%? The math may surprise you.

Multi-lot zero-basis trigger Premium

Two lots purchased years apart — one approaching zero basis, one with fresh basis.

Your projection will include:

  • 20-year basis erosion table with IRS worksheet line detail for every year
  • Basis erosion chart with conservative/base/aggressive sensitivity bands
  • Terminal comparison: tax if sold versus tax if inherited (including §751 recapture estimate)
  • Effective tax rate on distributions received over the full holding period
  • Every calculation expandable to show the formula, inputs, and IRC citation

EXAMPLE — What a Year 1 calculation trace shows:

Line 1: Beginning Basis$37,500
IRC §705(a) · Partner’s Basis Worksheet Line 1
Line 4: Income Items$440
IRC §705(a)(1) · K-1 Box 1 → Worksheet Line 4a
Calculation: 1,000 units × $2.20 dist × 20% taxable = $440
Line 8: Distributions$2,200
IRC §731 · K-1 Box 19A → Worksheet Line 8a
Calculation: 1,000 units × $2.20/unit = $2,200
Line 14: Ending Basis$35,740
IRC §705(a) · Worksheet Line 14
Calculation: $37,500 + $440 - $2,200 = $35,740
Federal Tax$129
Ordinary: ($440 - $88 QBI) × 32% = $113 → Schedule E Part II
QBI deduction: $88 → Form 8995
NIIT: $17 → Form 8960

Using This Tool With Your CPA

This tool produces projections that map to IRS forms your CPA works with every day. Each calculation traces to a specific Partner’s Basis Worksheet line, K-1 box, and IRC section. The Premium PDF export is formatted for CPA review — every assumption stated, every formula shown, every number traceable.

If your CPA wants to verify a specific year’s calculation, click the ▸ next to any row in the projection table. It shows the IRS worksheet line mapping, the K-1 box source, the formula, and the IRC citation.

For the most accurate projections, enter your actual current adjusted basis from your CPA’s records or the K-1 Basis Tracker.

Example: 1,000 EPD units at $37.50 — enter your position above to see your own projection

Total Cash Collected

$65,514

$53,455 – $90,193

20-year distributions

Total Tax Paid

$6,654

$4,134 – $11,819

Federal tax (excludes state)

Effective Rate

10.2%

7.7% – 13.1%

On cash received

Zero-Basis Inflection

Year 16

Range: Year 14 to Year 18

When §731 triggers begin

Year-by-year projection. Click any row to see the full IRS basis worksheet.

Year Distribution K-1 Taxable §731 Fed. Tax Basis Cum. Cash Eff. Rate
1$2,200$440—$129$35,740$2,2005.9%
2$2,288$458—$135$33,910$4,4885.9%
3$2,380$476—$140$32,006$6,8685.9%
4$2,475$495—$146$30,026$9,3435.9%
5$2,574$515—$151$27,967$11,9175.9%

Showing first 5 of 20 years

Year 1 — IRS Partner’s Basis Worksheet

Partner’s Instructions for Schedule K-1 (Form 1065) · Publication 541, Chapter 4

Line 1: Basis at beginning of year$37,500
IRC §705(a) · Partner’s Basis Worksheet, Line 1
Line 2: Capital contributed$0
Line 3: Increase in liabilities$0
Line 4a: Ordinary business income$440
IRC §705(a)(1) · K-1 Box 1 → Worksheet Line 4a · 1,000 × $2.20 × 20% = $440
Line 7: SUBTOTAL$37,940
Line 8a: Cash distributions$2,200
IRC §731 · K-1 Box 19A → Worksheet Line 8a · 1,000 × $2.20 = $2,200
Line 9: Decrease in liabilities$0
Line 10: BASIS BEFORE LOSSES$35,740
✓ Positive — no §731 gain this year
Lines 11-13: Losses/suspended$0
Line 14: ENDING BASIS$35,740
IRC §705(a) · $35,740 - $0 = $35,740

TAX: Ordinary $113 (Schedule E) + QBI -$88 (Form 8995) + NIIT $17 (Form 8960) = $129

Partner’s Instructions for Schedule K-1 (Form 1065) · IRS Publication 541

If You Sell in Year 20

Market Value$74,617
Adjusted Basis$0
§751 Ordinary (est.)~$40,000
→ Form 4797, Part II
Remaining LTCG~$34,617
→ Form 8949 → Schedule D
Tax on Sale$18,268
Lifetime Rate17.8%

If Inherited in Year 20

Market Value$74,617
Heir’s Basis$74,617
IRC §1014(a)
✓ Basis erosion: eliminated
✓ §751 recapture: eliminated
✓ §731 gains: eliminated
Heir’s Tax If Sold$0
Tax Saved$18,268

What Your Broker Would Report

Broker’s 1099-B:

Cost basis$37,500
Gain$37,117
Tax (at 18.8%)$6,978

What actually happens:

IRS basis$0
Actual gain$74,617
Actual tax$18,268

BROKER UNDERSTATES YOUR TAX BY $11,290

This is why you track basis yourself. Track yours →

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