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It combines the tax benefits of a partnership with the liquidity of publicly traded securities. To obtain the tax benefits of a pass through, MLPs must generate at least 90% or more of their income from qualifying sources such as from production, processing, storage, and transportation of depletable natural resources and minerals.
Summary Unrelated Business Taxable Income (UBTI) is the income that can trigger Unrelated Business Income Tax (UBIT) for tax-exempt organizations and retirement accounts. Investors can own MLPs ...
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 ...
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 ...
New York University Law School won the case because, at that point, tax-exempt organizations were not subject to income tax on their revenue from any source as long as the revenue was used towards the organization's tax-exempt purpose. [14] [15] In 1950, Congress amended the tax law to introduce the concept of unrelated business income. [17]
For example, U.S. tax law provides that trading in securities for the taxpayer's own account will not constitute a U.S. trade or business. [16] Thus foreign hedge funds formed as corporations do not generally pay corporate income tax. [17] Domestic tax-exempt entities face similar concerns when investing in funds structured as partnerships.
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 ...
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 ...