MLPs and Your Taxes: What You Need to Know

Master limited partnerships scare many investors with their tax attributes, but they aren't as complicated as many fear. Find out more about MLPs.

Apr 6, 2014 at 9:20AM

Master limited partnerships have been a lucrative investment over the years, with solid income that carries tax advantages over other investments. But many investors are scared to death of the tax complications of MLP investing.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, runs through the basics of MLP taxation. Dan notes that because MLPs incur no entity-level taxes, their investors have to deal with pass-through taxation via K-1 forms. That introduces a big headache for tax purposes, as K-1s are more complex than regular 1099 forms on other investments and can also have state income tax implications even for states other than where you live. But Dan notes that some companies have offered solutions to the tax issue, with Kinder Morgan Energy Partners (NYSE:KMP) offering investment opportunities through Kinder Morgan Management (NYSE:KMR) and Kinder Morgan (NYSE:KMI), while Linn Energy (NASDAQ:LINE) has its related LinnCo (NASDAQ:LNCO) entity. Dan concludes that taxes shouldn't be your only consideration with MLP investing, but it's important to understand the issues involved before you invest.

Take advantage of this little-known tax "loophole"
Learn more about the tax benefits of master limited partnerships in the latest report from The Motley Fool. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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