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Instead of a Form 1099, MLP investors receive a Schedule K-1 tax form. As a consequence of their pass-through status, holding MLPs in tax-exempt accounts may generate Unrelated Business Income Tax (UBIT). [2] To encourage tax-exempt investors, some MLPs set up C corporation holding companies of limited partner which can issue common equity. [3]
Unrelated Business Income Tax (UBIT) in the U.S. Internal Revenue Code is the tax on unrelated business income, which comes from an activity engaged in by a tax-exempt 26 U.S.C. 501 organization that is not related to the tax-exempt purpose of that organization.
As good as both IRAs and MLPs sound, don't expect to completely skip paying taxes if you buy MLPs in an IRA. A section of the tax code imposes what's called the Unrelated Business Income Tax, or ...
Similar to direct MLP investment, return of capital distributions from an MLP fund structured as a corporation lower an investor’s basis, and taxes are not [...] Beyond the K-1: Tax Treatment ...
Typically, 70-100% of MLP distributions have been considered a tax-deferred return of capital, which means one does not pay taxes on that portion of the distribution until the investor sells his ...
When there are tax exempt investors in a fund, they are not subject to U.S. income tax, but are still required to declare and pay taxes on "Unrelated Business Taxable Income" or "UBTI". [2] For tax exempt investors, dividends , royalties , rents , capital gains and interest income are not considered UBTI, but any money earned from conduct ...
Investors have long been attracted to MLPs for their generous yield, but a recent survey of over 600 financial advisors shows that the tax advantages of MLPs — including the potential for tax ...
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