Sunoco 2015 Annual Report Download - page 36

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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 generally 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 Department of the Treasury and the IRS issued proposed Treasury Regulations that provide a safe harbor
pursuant to which a publicly traded partnership 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 the subject of a securities loan (e.g., a loan to a "short seller") to cover a short sale of units
may be considered as having disposed of those units. If so, the unitholder 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 there are no specific rules governing the federal income tax consequences of loaning a partnership interest, a
unitholder whose units are the subject of a securities loan may be considered as having disposed of the loaned units. In that case,
the unitholder may 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 such disposition. Moreover, during the period of the loan, 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 of their units 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 us
and our public Unitholders. The IRS may challenge this treatment, which could adversely affect the value of our 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 such assets to the capital accounts of our unitholders and our general
partner. Although we may from time to time consult with professional appraisers regarding valuation matters, including the
valuation of our assets, we make many of the fair market value estimates of our assets ourselves using a methodology based
on the market value of our common units as a means to measure the fair market value of our assets. Our methodology may be
viewed as understating the value of our assets. In that case, there may be a shift of income, gain, loss and deduction between
certain unitholders and our general partner, which may be unfavorable to such unitholders. Moreover, under our current
valuation methods, subsequent purchasers of our common units may have a greater portion of their Internal Revenue Code
Section 743(b) adjustment allocated to our tangible assets and a lesser portion allocated to our intangible assets. The IRS may
challenge our valuation methods, or our allocation of Section 743(b) adjustment attributable to our tangible and intangible
assets, and allocations of income, gain, loss and deduction between our general partner and certain of our unitholders.
A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss
being allocated to our unitholders. It also could affect the amount of gain on the sale of common units by our unitholders and
could have a negative impact on the value of our common units or result in audit adjustments to the tax returns of our
unitholders without the benefit of additional deductions.