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a good summary on tax complications from Morning*. For full disclosure -- was looking at these during 2008 and 2009, but never pulled the trigger due exactly to the tax issues.
The K-1 issue is an irritation (especially given that some of the K-1's may not be available until after April 1 - one very large MLP in particular was particularly bad last year, as I thought the K-1 wasn't going to arrive until after April 16.) I mainly have just kept it to a couple of K-1 investments that I particularly like/consider long-term holdings - primarily Brookfield Infrastructure (BIP).
The MLP Management companies are a way to have exposure to a couple of specific MLPs without K-1s - Kinder Morgan Management (KMR) and Enbridge Energy Management (EEQ). The only issue with both is that you are only given the option of share dividends, not cash dividends.
Kinder Morgan: "There are two ways to own limited partner stakes in Kinder Morgan Partners (KMP):
KMP units: these are conventional MLP units which generate quarterly cash distributions. KMP unit holders receive K-1 forms each year. KMP units may be subject to Unrelated Business Income Tax (UBIT) if held in tax-deferred accounts.
Kinder Morgan Management (KMR) shares: KMR shares are known as I-shares. They are pari passu with KMP units, with the only real difference being that distributions are paid in additional shares rather than cash. KMR shares can be more tax efficient and are well suited for tax-deferred accounts. KMR shareholders do not receive K-1 forms."
Enbridge Income Fund (EBGUF.PK) is also an interesting Canadian corp that offers an MLP-like yield and is a collection of various pipeline/power assets.
Reply to @Mark: don't you need to file in each state where the pipeline runs? I know we did it for a cayman fund, and the cost of tax filing killed the entire access return.
Comments
The MLP Management companies are a way to have exposure to a couple of specific MLPs without K-1s - Kinder Morgan Management (KMR) and Enbridge Energy Management (EEQ). The only issue with both is that you are only given the option of share dividends, not cash dividends.
Kinder Morgan:
"There are two ways to own limited partner stakes in Kinder Morgan Partners (KMP):
KMP units: these are conventional MLP units which generate quarterly cash distributions. KMP unit holders receive K-1 forms each year. KMP units may be subject to Unrelated Business Income Tax (UBIT) if held in tax-deferred accounts.
Kinder Morgan Management (KMR) shares: KMR shares are known as I-shares. They are pari passu with KMP units, with the only real difference being that distributions are paid in additional shares rather than cash. KMR shares can be more tax efficient and are well suited for tax-deferred accounts. KMR shareholders do not receive K-1 forms."
http://seekingalpha.com/article/741151-how-to-earn-tax-free-dividends-on-2-quality-mlps
http://seekingalpha.com/article/493271-ceo-interview-energy-c-park-shaper-of-kinder-morgan
Enbridge Income Fund (EBGUF.PK) is also an interesting Canadian corp that offers an MLP-like yield and is a collection of various pipeline/power assets.
I own KMR/BIP