CQP is a publicly traded partnership that issues a K-1. Do not confuse it with LNG (Cheniere Energy, Inc.), which is a C-corp issuing a 1099-DIV. CQP's LNG terminal economics create outsized depreciation — eroding basis at 3-5% per year vs. 2-4% for pipeline MLPs. After 8 years, the broker-vs-IRS gap on a $5,000 CQP position reaches $1,840.
By Lucas Andersen — Last updated April 9, 2026
CQP 2025 K-1 tax schedules became available online after March 6, 2026. Mailed copies shipped on or about March 9, 2026. Download at taxpackagesupport.com/cheniere or call (866) 709-8182.
This is the single most common Cheniere investor mistake. CQP (NYSE American) is a limited partnership — you receive a K-1, distributions reduce your basis under §733, and you face §751 recapture at sale. LNG (NYSE American) is Cheniere Energy, Inc., a C-corporation — you receive a 1099-DIV with qualified dividends and standard capital gains treatment. No K-1, no basis erosion, no §751. Both trade on the same exchange, making confusion even more likely.
How to check which you own: Open your brokerage statement. The ticker is definitive — CQP is the partnership, LNG is the C-corp. CQP’s CUSIP starts with 16411R, LNG’s starts with 16411Q. Your year-end tax documents confirm: a K-1 means CQP, a 1099-DIV means LNG.
What happens if you file the wrong form: If you own CQP but report only 1099-DIV data, you miss the K-1 basis adjustments entirely — your reported basis will be too high, your reported gain too low, and the IRS automated matching system will flag the discrepancy. You also miss the §199A deduction. Going the other direction creates phantom basis adjustments that don’t exist. Either mismatch can trigger a CP2000 notice.
Pipeline MLPs like EPD and ET earn toll-road fees on throughput volume — their revenue scales with how much product flows through the pipe. CQP earns revenue from long-term (20+ year) take-or-pay LNG sale and purchase agreements with investment-grade counterparties (Shell, TotalEnergies, Korea Gas Corporation). Customers pay regardless of whether they take the LNG. This makes CQP’s cash flows more predictable than most pipeline MLPs, but creates a fundamentally different tax profile.
The difference shows up on your K-1 in two ways. First, CQP’s enormous depreciable asset base drives outsized depreciation pass-throughs. The Sabine Pass terminal has six operational liquefaction trains, each costing $3–4 billion to construct. That $20B+ in capex flows to unitholders as accelerated depreciation, sheltering income and driving basis erosion at 2–3x the rate of a pipeline MLP with equivalent yield. Second, CQP’s Box 1 (ordinary business income) tends to be higher and more variable than pipeline MLPs. Take-or-pay revenue can generate substantial operating income in strong LNG demand years, only partially offset by depreciation. This higher Box 1 matters for UBTI in IRA accounts and for the §199A QBI deduction, which can be larger in absolute dollars for CQP than for pipeline MLPs at similar position sizes.
CQP pays ~$0.825/quarter (~$3.30/year, ~5.5% yield) with approximately 60–75% return of capital, eroding basis ~3–5% per year. Pipeline MLPs (EPD, MPLX, WES, PAA) erode at 2–4%. Royalty MLPs like NRP erode at 5–8%+. CQP sits in the middle but closer to the fast end. At this rate, a CQP investor could approach zero basis in approximately 7–10 years. CQP’s distribution also includes a variable component that fluctuates with LNG market conditions — unlike EPD’s predictable quarterly increases — so your annual basis erosion rate isn’t constant.
Purchase: 100 CQP units at $50 = $5,000 total basis. Net annual erosion of approximately $230 per year (4.6% of purchase price) after K-1 income offsets. Year 1: IRS basis $4,770 (broker: $5,000, gap: $230). Year 4: IRS basis $4,080 (broker: $5,000, gap: $920). Year 6: IRS basis $3,620 (broker: $5,000, gap: $1,380). Year 8: IRS basis $3,160 (broker: $5,000, gap: $1,840 — a 37% decline from purchase).
The pipeline comparison: A pipeline MLP like EPD eroding at ~$130/year would show a $1,040 gap over the same 8 years. CQP’s gap ($1,840) is 77% larger at the same holding period. If you sell CQP at $59/unit ($5,900 proceeds) at Year 8, your broker calculates a $900 gain. The IRS expects $2,740 — broker understates your gain by approximately 3x. And a substantial portion of that $2,740 is §751 ordinary income from the accumulated depreciation recapture on CQP’s massive LNG infrastructure. Expect §751 to represent 40–60%+ of total gain for positions held 3+ years.
CQP issues a single K-1 with one EIN — straightforward compared to Energy Transfer’s three. Box 1 (ordinary business income): can show positive income more frequently than pipeline MLPs because LNG terminal take-or-pay revenue can exceed depreciation in strong years. Box 19A (distributions): ~$3.30/unit annually, but the variable component means this changes year to year. Item K (liabilities): CQP has significant debt ($15B+ at operating subsidiary level), and changes in your liability share create basis adjustments that can be larger per-unit than for smaller MLPs. Box 20 Codes Z & AE: §199A QBI data — CQP’s higher income allocations can make the QBI deduction more valuable in absolute dollars than for pipeline MLPs at similar position sizes.
CQP carries meaningfully higher UBTI (Unrelated Business Taxable Income) risk than most pipeline MLPs. LNG terminal economics can generate significant Box 1 ordinary business income, which flows through as UBTI in tax-exempt accounts like IRAs and Roth IRAs. If UBTI exceeds $1,000 across all partnerships held at the same IRA trustee, the IRA must file Form 990-T and pay tax from IRA funds at trust rates — up to 37% at just $14,451 of income.
Illustrative threshold comparison: A pipeline MLP like EPD might allocate $2–4/unit in Box 1 income, meaning you’d need 250–500 units ($7,000–$14,000 at $28/unit) before UBTI becomes a concern. CQP’s higher Box 1 per unit means the $1,000 UBTI threshold can be reached at approximately $20,000–$30,000 in position size — roughly half the dollar amount needed for a pipeline MLP. In strong LNG demand years, even smaller CQP positions could push above $1,000. A taxable account preserves the §199A deduction, tax-deferred distributions, basis step-up at death, and suspended passive loss release — all four of which are lost in an IRA. If you want LNG exposure in a retirement account, consider the C-corp parent (ticker: LNG) instead. See the MLP in IRA guide for the full analysis.
CQP’s operations are concentrated in Louisiana (Sabine Pass) and Texas (no income tax). Most unitholders face a single state question: whether their Louisiana allocation exceeds the nonresident filing threshold. For small positions, the answer is often no — check your K-1 state schedule. Common CQP mistakes: confusing CQP (K-1) with LNG (1099-DIV), underestimating the speed of basis erosion compared to pipeline MLPs, ignoring the variable distribution component when projecting future basis, not planning for outsized §751 recapture from the massive LNG asset base, and holding large positions in an IRA without considering UBTI risk.