Been looking into MLP's, specifically KMP and WPZ. So far they look pretty ideal for an ERE person looking for current income. One downside I keep seeing people bring up is the distributions are reported on a k-1. According to this page, http://b-i.forbesimg.com/phildemuth/fil ... LP-Tax.jpg you have to enter numbers into 7 different forms.
Anybody have any opinions on these?
Any opinions on MLP's
Re: Any opinions on MLP's
Yeah, the K-1 thing can be annoying, but using tax software does help a bit. More annoying I think, is that if you are generating enough income via MLPs, is that you may be on the hook for filing state income taxes in states where your MLP operates.
In terms of investment risk, I see the two biggies being interest rates and changes to the tax code. MLPs don't retain a lot of earnings, and their expansion projects are debt-financed, so the interest rate environment has a big effect. And while they have favorable tax treatment now, it's not guaranteed for the the long term. (then again, similar arguments could be made against dividend-paying stocks or muni bonds).
In terms of investment risk, I see the two biggies being interest rates and changes to the tax code. MLPs don't retain a lot of earnings, and their expansion projects are debt-financed, so the interest rate environment has a big effect. And while they have favorable tax treatment now, it's not guaranteed for the the long term. (then again, similar arguments could be made against dividend-paying stocks or muni bonds).
Re: Any opinions on MLP's
My wife has owned a small amount of KMP for several years (20% of a self directed IRA). She purchased it at $49/share using part of a rollover from a former employer. She has been very happy with it so far. She does not own enough of it to generate significant income, but her goal is to grow capital while mitigating risk rather than income. With a current yield of 6.70%, the tax forms haven't been enough of a deterence to scare her off yet. She is just letting the yield compound in the IRA.
It has a good track record and appears to be very well managed.
We use Turbo Tax and so far it's not been too bad to do our taxes. This year I spent about 10 minutes filing the tax forms. I would probably feel differently if we had six figures invested in KMP.
It has a good track record and appears to be very well managed.
We use Turbo Tax and so far it's not been too bad to do our taxes. This year I spent about 10 minutes filing the tax forms. I would probably feel differently if we had six figures invested in KMP.
-
jacob
- Site Admin
- Posts: 15979
- Joined: Fri Jun 28, 2013 8:38 pm
- Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
- Contact:
Re: Any opinions on MLP's
http://etfdb.com/type/sector/energy/mlp/
Putting the MLPs into an ETF ostensibly avoids all the tax hassles. There is, of course, a convenience-fee.
Putting the MLPs into an ETF ostensibly avoids all the tax hassles. There is, of course, a convenience-fee.
Re: Any opinions on MLP's
Just found you can buy KMR instead of KMP and avoid tax hassles also.
-
ICouldBeTheWalrus
- Posts: 130
- Joined: Tue May 31, 2011 3:00 am
Re: Any opinions on MLP's
My own feeling is that direct ownership of MLPs is just too much of a pain in the ass for taxes. And putting them in your IRA isn't necessarily safe either: http://www.naptp.org/PTP101/MLPs_Retire ... counts.htm
Re: Any opinions on MLP's
From the link on the tax consequences:
two MLPs (Enbridge Energy Partners and Kinder Morgan Energy Partners) have affiliates that issue special shares that pay distributions in the form of additional shares and do not trigger UBIT; an additional MLP (Linn Energy, LLC) has formed an affiliate that pays cash dividends. If you want this income opportunity for your retirement account but don’t to risk incurring UBIT, you may want to check out these options.
two MLPs (Enbridge Energy Partners and Kinder Morgan Energy Partners) have affiliates that issue special shares that pay distributions in the form of additional shares and do not trigger UBIT; an additional MLP (Linn Energy, LLC) has formed an affiliate that pays cash dividends. If you want this income opportunity for your retirement account but don’t to risk incurring UBIT, you may want to check out these options.