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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: Re: ROC Revisited Date: 2/28/2008 7:44 AM
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Hello. Regarding return of capital via MLPs etc--when original capital investment has all been returned are all distributions thereafter taxed as ordinary income? And if so, if one sold it at that time and bought it again later, wouldn't one be starting the process all over? Would threr be a wash rule application regarding repurchase?

The process is slightly more complicated than you envision. While cash distributions reduce your capital investment, the income which is allocated to you (via K-1) increases your capital investment. If the total cash distributed exceeds your adjusted cost basis (investment + income - distributions), the excess cash distribution is a capital gain.

If you sell at this point, you will be selling for a gain (the MLP presumably still has some value), so wash sale rules don't come into play. A subsequent repurchase starts the process over again.

Ira
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