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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]
The primary attraction of investing in MLPs through a C-Corp fund is achieving diversified exposure with a Form 1099 (no K-1), while enjoying many of the tax benefits associated with direct MLP ...
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 ...
One of the largest reasons for a company to set up as an MLP is the preferential tax status. An MLP passes all tax obligations for the company along to the unitholders, who pay based on their ...
Structure of a private equity or hedge fund, which shows the carried interest and management fee received by the fund's investment managers. The general partner is the financial entity used to control and manage the fund, while the limited partners are the individual investors who receive their return as capital interest.
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 ...
A blocker corporation is a type of C Corporation in the United States that has been used by tax exempt individuals to protect their investments from taxation when they participate in private equity or with hedge funds. In addition to tax exempt individuals, foreign investors have also used blocker corporations. [1]
MLPs benefit from a tax-deferral feature on their distributions that can enable investors to defer taxes on a meaningful percentage of their distributions until they sell their units.