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CMA630 (< 20)

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MLP's as good as it gets?



January 07, 2013 – Comments (4)

Earn high tax-free 7% investment income with a Master Limited Partnership (MLP) U.S. energy & natural resource company portfolio

 The IRS tax code allows certain types of structured businesses that are publically traded partnerships (MLPs) to be exempt from federal corporate income taxation. These are "flow through entities", whereby partnership income distributions flow through to the limited partners. MLP firms operate passive businesses in U.S. energy exploration, production, conversion, storage and pipelines. Plus, there are other qualifying MLPs that are engaged in natural resource businesses. The income distributions of MLPs to partners are classified as "return of capital" and thus not subject to state or federal personal taxation. MLPs are long term income investments that have a consistent record of increasing their quarterly income distributions. An MLP portfolio can be of great strategy for building wealth via tax-free annual compounded reinvestment of income. For retirees in high state and federal tax brackets, the MLP tax-free income is quite desirable. How would you like to have 7% tax-free income for the rest of your life?

4 Comments – Post Your Own

#1) On January 08, 2013 at 12:24 AM, awallejr (36.52) wrote:

Hey I have been touting those since 2009.  I wouldn't say tax free for the rest of your life, however.  It is only tax free until your basis reaches zero.  But you could reset it by selling and paying capital gains.

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#2) On January 08, 2013 at 12:10 PM, CMA630 (< 20) wrote:

In response to your comment.. That when the cost basis reaches zero, then under tax law further distributions are classified as long term cap. gain income.. If the tax payer, at that time, is in the 10 or 15% tax bracket that capital gain income is tax free.. Alternatively, if the tax payer dies who holds these MLP's that have unrealized capital or ordinary income gains in his/her holdings, the estate of that tax payer would get a full step up in cost basis to current market value at date of death.. Thus eliminating all unrealized gains in the MLP holdings to the holders heirs spouse or children..

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#3) On January 08, 2013 at 11:25 PM, awallejr (36.52) wrote:

If the tax payer, at that time, is in the 10 or 15% tax bracket that capital gain income is tax free..

Well not sure what you mean.  If you are in the bottom tax bracket odds are you aren't buying stocks.  But if you mean the uber rich that are in the capital gains bracket that has moved to about 24%.

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#4) On January 11, 2013 at 11:08 AM, CMA630 (< 20) wrote:

You have to consider tax write-offs, possible muni bond income, etc to be in the lower tax bracket without being classified as " low income "..

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