What are the tax consequences of owning a master limited partnership?

already exists.

Would you like to merge this question into it?

already exists as an alternate of this question.

Would you like to make it the primary and merge this question into it?

exists and is an alternate of .

Assuming you mean owning a share in a master limited partnership (MLP)as an investor, he short answer is: you get tax-deferred income on a quarterly basis, and pay income tax on your share of partnership income, which is usually far smaller than the distribution. The long anwer: the important thing about an MLP, or any partnership, is pass-through taxation. That is, an MLP does not pay an entity level tax the way a corporation does. Rather, the partners--that is you and the other unitholders--are allocated their proportionate shares of all tax items, net them out, and pay the tax on the resulting taxable income. So, you will be allocated a share of the partnership's income, its depreciation deductions, etc. All this is on paper--you don't actually receive an amount equal to your share of income. You do, however, receive a quarterly distribution, which is like a dividend, except that it is treated differently for tax purposes. Because the partnership doesn't pay a tax, it can pay out more of its income to you in case than a corporation typically can. Instead of being taxed currently, the distribution is subtracted from your basis in your partnership units. When you sell your units, your taxable gain is the difference between your sales price and your adjusted basis, so the tax on the distributions is collected then. While the distributions lower your basis, your share of taxable income and other things increase it, and so it takes longer than you might think to get your basis to zero. If you ever do get to zero, the distributions would become taxable. For more information, visit the website of the MLPs' trade association, the National Association of Publicly Traded Partnerships (http://www.naptp.org)...the answer is being submitted by its executive director.
+ 33 others found this useful
Thanks for the feedback!

Do partnerships pay income taxes?

No but they do file a 1065 income tax return and report each partners share of the taxable income to them on a schedule 1065 K-1 and each partner then reports the partner shar (MORE)

When a MLP is an ETF?

If your focus on yield has you wondering if there is a better fixed income investment, you may already have noticed that the world of ETFs and ETNs has developed a product bas (MORE)

Forming a Limited Partnership Made Simple

A limited partnership is a business with a general partner, who is responsible for the day-to-day operations of the company, and one or more limited partners, who invest in th (MORE)

The True Cost of Foreclosure

Foreclosure is an unfortunate event that happens to more and more people every day. As the economy changes and the unemployment rate rises, many people are finding themselves (MORE)

What is a Partnership?

Before starting a business, one should determine how it will be organized. There are four ways to set up a new business. It can be a sole proprietorship, a corporation, a limi (MORE)

Taxes for Businesses That Are Partnerships

If you are a member of a business that is a partnership, it is important to know how to pay taxes on the income you receive from it. Unlike some other types of business entiti (MORE)

Partnerships and Business: Hand in Hand

There are six types of business partnerships and each are taxed using different methods. These partnerships or corporations must be established in the state that the business (MORE)

When a limited partnership is formed?

A limited partnership is formed upon the execution of an agreement between a limited partner (usually a financial contributor) and a general partner (responsible for the day-t (MORE)

What are advantages of a limited partnership?

Liability Protection:   In general partnerships, each participant is personally responsible  for the actions of the company. This includes debts, liabilities  and the wr (MORE)
In Uncategorized

What is meant by a limited partnership?

A limited partnership is a type of partnership where each limited partner has limited liability and they are only responsible for their own investment. So when the company los (MORE)