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Master Limited Partnerships



Nilus Mattive takes a closer look at Master Limited Partnerships and how they work or can be beneficial to investors. Mr. Mattive discusses MLPs further.



Master Limited Partnerships (MLPs), also known as publicly traded partnerships (PTPs), are companies that organize as partnerships and are liable for the obligations of the partnership, but also get all the direct benefits.



Only certain kinds of companies can qualify for this special status. At least 90% of the company's income must come from certain sources such as interest, real estate rents, gains on commodities, and revenue from activities related to natural resources.



Most MLPs trade on the New York Stock Exchange and are bought in a regular brokerage account just as a stock would. Technically, though, units are purchased as opposed to shares. When and investor buys these units, they become a partner.



In a partnership, everyone is part of the same legal entity. Corporations pay taxes and then their shareholders, who receive income, pay taxes again. With partnerships, all the income is treated as if it is earned by the partners and it is allocated to them based on their individual stake.



The partners also share in any other events that typically affect taxable income such as deductions and credits. MLPs are required by law to pay out most of their cash flow to partners in the form of regular quarterly distributions. By all appearances, these payments look like dividends. However, there's an important difference at tax time; the bulk of the quarterly distributions are considered a return of capital and not taxable investment income.



"Realistically, investors are better off holding for longer time periods. And in general, they should not hold MLPs in tax-sheltered accounts like IRAs. That's because any amount of income that exceeds $1,000 will likely be taxable even if the MLP is held inside a tax-sheltered account. The rewards can certainly be great; many MLPs are yielding in excess of 6% a year. The ability to defer most of that income is a huge advantage. And you also stand to book capital gains along the way," Mattive states.



To read this issue online, please visit:


http://www.moneyandmarkets.com/Issues.aspxMaster-Limited-Partnerships-Pay-Tax-Advantaged-Dividends-1800



About NILUS MATTIVE & MONEY AND MARKETS     



Nilus Mattive, a financial analyst at Weiss Research, is the editor of Dividend Superstars, a monthly publication and is also the editor of the company's daily e-letter, Money and Markets. Formerly a senior editor of Standard & Poor's The Outlook, the oldest continuously published investment newsletter in the country, he has written for a number of investment websites, including BusinessWeek and Individual Investor. Mr. Mattive is the author of The Standard & Poor's Guide for the New Investor (McGraw-Hill, 2004) and has appeared on the popular investment radio show, Traders Nation, to discuss his views on personal finance.



Mr. Mattive graduated cum laude from the University of Scranton.



Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.






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