Tax-exempt entities and non-U.S. persons face unique tax issues from owning common units that may
result in adverse tax consequences to them.
Investment in common units by tax-exempt entities, such as individual retirement accounts, or IRAs, other
retirement plans and non-U.S. persons raises issues unique to them. For example, virtually all of our income
allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans,
will be unrelated business taxable income, which may be taxable to them. Distributions to non-U.S. persons
will be reduced by federal withholding taxes at the highest applicable effective tax rate, and non-U.S. persons
will be required to file United States federal tax returns and pay tax on their share of our taxable income. If a
unitholder is a tax-exempt entity or a non-U.S. person, the unitholder should consult its tax advisor before
investing in our common units.
We will treat each purchaser of our common units as having the same tax benefits without regard to the
actual common units purchased. The IRS may challenge this treatment, which could adversely affect the
value of the common units.
Because we cannot match transferors and transferees of common units and because of other reasons, we
will adopt depreciation and amortization positions that may not conform to all aspects of existing Treasury
Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits
available to the unitholders. It also could affect the timing of these tax benefits or the amount of gain from the
sale of common units and could have a negative impact on the value of our common units or result in audit
adjustments to the unitholders’ tax returns.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our units
each month based upon the ownership of our units on the first day of each month, instead of on the basis
of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the
allocation of items of income, gain, loss and deduction among our unitholders.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our units
each month based upon the ownership of our units on the first day of each month, instead of on the basis of the
date a particular unit is transferred. The use of this proration method may not be permitted under existing
Treasury Regulations. Recently, however, the U.S. Treasury Department issued proposed Treasury Regulations
that provide a safe harbor pursuant to which publicly traded partnerships may use a similar monthly simplifying
convention to allocate tax items among transferor and transferee unitholders. Nonetheless, the proposed
regulations do not specifically authorize the use of the proration method we have adopted. If the IRS were to
challenge our proration method or new Treasury regulations were issued, we may be required to change the
allocation of items of income, gain, loss and deduction among our unitholders.
A unitholder whose units are loaned to a “short seller” to cover a short sale of units may be considered as
having disposed of those units. If so, he would no longer be treated for tax purposes as a partner with
respect to those units during the period of the loan and may recognize gain or loss from the disposition.
Because a unitholder whose units are loaned to a “short seller” to cover a short sale of units may be
considered as having disposed of the loaned units, he may no longer be treated for tax purposes as a partner with
respect to those units during the period of the loan to the short seller and such unitholder may recognize gain or
loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss
or deduction with respect to those units may not be reportable by the unitholder and any cash distributions
received by the unitholder as to those units could be fully taxable as ordinary income. Unitholders desiring to
assure their status as partners and avoid the risk of gain recognition from a loan to a short seller are urged to
modify any applicable brokerage account agreements to prohibit their brokers from borrowing their units.
We have adopted certain valuation methodologies that may result in a shift of income, gain, loss and
deduction between the general partner and the unitholders. The IRS may challenge this treatment, which
could adversely affect the value of the common units.
When we issue additional units or engage in certain other transactions, we determine the fair market value
of our assets and allocate any unrealized gain or loss attributable to our assets to the capital accounts of our
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