USAC 20-Year Tax Projection

Assumptions for this projection:

• Position: 400 units at $28 per unit ($11,200 total)
• Distribution: $0.53/quarter ($2.10/year), growing at 0.0%
• Growth source: Distribution flat since mid-2015. Management has indicated distribution growth possible once coverage consistently exceeds 1.6x.
• ROC: ~85% of distribution (estimated from historical K-1 data)
• Federal tax bracket: 32% (Married Filing Jointly)
• NIIT: 3.8% on investment income above $250,000 threshold
• §199A QBI deduction: active (20% on qualified PTP income)
• K-1 entities: 1
• Operating states: ~12

These are default assumptions based on historical data. For your actual numbers → Enter your position in the Portfolio Simulator

Last computed: 2026-04-03 | Engine: 429 tests passing | v0.1.0

⚠ BROKER UNDERSTATES YOUR TAX BY $3,802

Basis Erosion — USAC Over 20 Years

Blue line: base case (0.0% growth). Shaded area: sensitivity range. Yellow marker: basis reaches zero in Year 16.

Cumulative Cash vs. Tax — USAC

The growing gap between distributions received and taxes paid is the core value proposition of MLP holding.

USAC 20-Year Projection Table

IRS Partner’s Basis Worksheet — Key Years

Partner’s Instructions for Schedule K-1 (Form 1065), Worksheet for Adjusting the Basis of a Partner’s Interest in the Partnership, Lines 1–14.

Sensitivity Analysis

Sell vs. Inherit in Year 20

Tax saved by holding until death: $5,886 — IRC §1014(a)

Frequently Asked Questions

What is my USAC basis after 10 years?

After 10 years of holding 400 USAC units, your IRS-adjusted basis drops from $11,200 to $4,060. This is calculated using the IRS Partner’s Basis Worksheet (IRC §705(a)), Lines 1–14, applying 0.0% annual distribution growth and ~85% return of capital.

When does USAC basis reach zero?

At base-case assumptions, USAC basis reaches zero in Year 16. After that, distributions trigger §731 capital gains — you owe tax on distributions even though your brokerage statement shows no change. This is sometimes called “phantom income.”

How much tax if I sell USAC after 20 years?

If you sell 400 USAC units after 20 years at an estimated market value of $22,286, total tax on sale is $5,886. This includes ~$16,000 in §751 ordinary income recapture (taxed at up to 37%) and $6,286 in long-term capital gains.

Should I sell USAC or hold until death?

Selling in Year 20 triggers $5,886 in taxes. If inherited instead, your heirs receive a §1014 stepped-up basis of $22,286, eliminating all deferred taxes and §751 recapture. The tax difference is $5,886.

What is USAC’s distribution yield after tax?

The nominal distribution yield is 7.5%. Due to the high return-of-capital percentage (~85%), most of the distribution is tax-deferred. The 20-year effective tax rate on cash received is 7.8%, making the after-tax yield approximately 6.9%.

Should I hold USAC in an IRA?

Holding MLPs in an IRA triggers Unrelated Business Taxable Income (UBTI) under IRC §512. If UBTI exceeds $1,000 in a tax year, the IRA must file Form 990-T and pay tax at trust rates. For USAC with 400 units generating ~$126 in annual taxable income, this threshold may or may not be reached depending on the year. Most MLP investors prefer taxable accounts to preserve the §1014 step-up benefit.

What happens to USAC when I die?

Under IRC §1014(a), your heirs receive a stepped-up basis equal to the fair market value at date of death. For this projection, that means a basis of $22,286 instead of the eroded basis of $0.00. All accumulated §751 recapture (~$16,000) is eliminated. Tax saved: $5,886.

How complicated is USAC’s K-1?

USAC issues 1 K-1 form per year. The K-1 includes state allocation schedules for ~12 states, which may require additional state tax filings depending on your home state’s de minimis thresholds.

Related Tools & Guides

• Enter your actual position → Portfolio Simulator
• Read the full USAC K-1 tax guide →
• Compare all MLP projections →
• Track your real basis from actual K-1 data → K-1 Basis Tracker