MLP's

Laurie Frederiksen on

We continue to try and warn clubs from investing in Master Limited Partnerships such as KMP, ETP etc.

You can see a list of many of them here:

Before You Invest

MAKE SURE YOU ALWAYS KNOW WHAT YOU ARE INVESTING IN!!!!

These have tickers like stocks and you buy them from your broker. But that does not mean they are stocks. They usually have the word Partner or Partnership as part of their name. They may also have LLC as part of their name.

This is a great description of the tax reporting issues that come along with them as investments. And, it doesn't even get into the fact that as a club, you'd be laying these issues on top of having to handle these things correctly for your partnership and all its members.

A Practical Guide to the Tax Issues of Investing in Master Limited Partnerships

MAKE SURE you understand all of this, even if you are investing in them in your personal portfolios.

You will probably need to subtract large tax preparation bills from any income you receive from them.

The complexities involved are the reason that doing the accounting and tax prep to accommodate investments in them in your club is beyond the scope of the services we can provide you.

Sorry to be so adamant, but with everyone looking for "Returns", many are being deceived (in my opinion) by the "Returns" advertised by these investments.

Laurie Frederiksen
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ira smilovitz on

Thank you Laurie for locating this article (A Practical Guide to the Tax Issues of Investing in Master Limited Partnerships). It should be required reading for all investment club members.

There are a number of issues not mentioned in the article because it was focused on individual investors in MLPs. When a club invests in an MLP, it may void any state tax return filing exemption offered to investment clubs. Investing in an MLP can also subject the club has to paying state income tax on its own behalf or having to withhold tax on behalf of its members.

As Laurie said, we cannot emphasize strongly enough that clubs should never invest in MLPs.

Ira Smilovitz

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