Sunoco 2015 Annual Report Download - page 34

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terminated requests and the IRS grants special relief, among other things, the partnership may be permitted to provide only a
single Schedule K-1 to unitholders for the tax years in which the termination occurs.
As a result of ETP's acquisition of the Partnership in October 2012, the 50 percent threshold described above was
exceeded. Our classification as a partnership was not affected, but instead, we were treated as a new partnership for federal
income tax purposes. The technical termination resulted in the closing of our taxable year for all unitholders. In the case of a
unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may have
resulted in more than twelve months of our taxable income or loss being included in the unitholder's taxable income for the
year of termination. As a result of the technical termination, we were required to file two tax returns for the calendar year 2012.
We were required to make new tax elections after the technical termination, including a new election under Section 754 of the
Internal Revenue Code, and the termination resulted in a deferral of our deductions for depreciation. A termination could also
result in penalties if we had been unable to determine that the termination had occurred. Moreover, the technical termination
could accelerate the application of, or subject us to, any tax legislation enacted before the technical termination. The IRS has
recently announced a publicly traded partnership technical termination relief procedure whereby if a publicly traded partnership
that has technically terminated requests publicly traded partnership technical termination relief and the IRS grants such relief,
among other things, the partnership will only have to provide one Schedule K-1 to unitholders for the calendar year
notwithstanding two partnership tax years. We were successful in petitioning the IRS for this technical termination relief.
Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions
from us.
Because our unitholders will be treated as partners to whom we will allocate taxable income which will be different in
amount than the cash we distribute, our unitholders will be required to pay any federal income taxes and, in some cases, state
and local income taxes on their share of our taxable income even if they receive no cash distributions from us. Our unitholders
may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability
that result from that income.
Tax gain or loss on disposition of our limited partner units could be more or less than expected.
If our unitholders sell their common units, they will recognize a gain or loss equal to the difference between the amount
realized and their tax basis in those common units. Prior distributions to our unitholders in excess of the total net taxable
income the unitholder was allocated for a unit, which decreased their tax basis in that unit, will, in effect, become taxable
income to our unitholders if the common unit is sold at a price greater than their tax basis in that common unit, even if the price
they receive is less than their original cost. A substantial portion of the amount realized, whether or not representing gain, may
be ordinary income. In addition, if our unitholders sell their units, they may incur a tax liability in excess of the amount of cash
received from the sale.
Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse
tax consequences to them.
Investment in common units by tax-exempt entities, such as individual retirement accounts ("IRAs"), 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 individual retirement accounts and other retirement plans, will be unrelated business taxable
income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest
applicable effective tax rate, and non-U.S. persons will be required to file U.S. federal tax returns and pay tax on their share of
our taxable income. If you are a tax exempt entity or non-U.S. person, you should consult your tax advisor before investing in
our common units.
Our unitholders will likely be subject to state and local taxes and return filing requirements in states where they do not live
as a result of investing in our limited partner units.
In addition to federal income taxes, our unitholders will likely be subject to other taxes, including state and local taxes,
unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which
we do business or own property, even if they do not live in any of those jurisdictions. Our unitholders will likely be required to
file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further,
our unitholders may be subject to penalties for failure to comply with those requirements. We currently conduct our business
and own assets in 35 states, most of which impose a personal income tax. As we make acquisitions or expand our business, we
may own assets or conduct business in additional states that impose a personal income tax. It is our unitholders' responsibility
to file all United States federal, state and local tax returns.