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You would only receive K1 if you a current partner - means you OWN units in MPL.If you short on MPL units - you would not receive K1 for that period.
If you are taking a long position - you are listed as an owner of the partnership interest (partner) and regardless if you lend that interest to someone - you are still the owner - and you will be getting K1 for the time you are listed as an owner.
Only the owner (partner) will get K1 statement.
When the SAME units (which are representing the ownership interest in the partnership) are SOLD - the ownership is charged - and the person who purchased them - becomes the owner from THAT date.You would be only listed as an owner up to the date the unit is sold.
The issue is that the partnership is keeping a record of partners and issue K1 to each partner based on the ownership percentage and length that person or an entity was a partner.The partnership in MLP is measured in units - whoever owns the units - that is a partner.Thus - when you owned the unit - you was a partner - and when the same unit is SOLD - you do not own it anymore - and there is a different owner. So - you will receive K1 for the time you owned the unit, and another buyer will receive K1 for the time he owns that unit.
That is based on ownership report that the MLP keeps.
We are talking about units - correct?These units represent the ownership. The ownership is reported by the MLP.Distributions are made during the tax year based on the ownership records on specified days - so whoever owned THAT unit on that specific day - receives distribution and K1.
If you are not an owner of the record of the MLP - you would not receive any distribution and would not receive K1 - while you might have the ownership recorded with your broker.
The critical point is that each unit has assigned the ownership recorded by the MLP - and that is used for distributions and K1.
In your example person A owns the unit.then person A lend the unit to person B - but for MLP records - the person A is still an owner.Then person B sold the unit to the person C - on THAT date the ownership was changed and must be recorded with MLP.So - before that sale date - person A was an owner of records, and after that sale date - the person C becomes the owner of records.Thus - for distributions before the sale date - they would be issued to the person A, and for distributions after the sale date - to the person C.
If the sale date is in the middle of the year - it is possible that both - person A and person C would receive K1 statements.
Distributions and K1 reporting are done by the MLP and based on their ownership records.
If the sale is RECORDED by the MLP and the person C is the owner of the records - that person will have all distribution and all K1 reporting.
Regarding reporting the sale transaction - that is a different issue
Person A still is the owner according to the broker and the sale is not reported to the IRS.
But the person B sold the unit - and that is reported to the IRS - so the person B will need to report the sale transaction on the tax return.