The Global X Research Team is pleased to announce the release of its MLP Tax Primer, which covers some of the tax implications of investing in MLPs and investment vehicles that hold MLPs.
Key Takeaways
- Exchange traded products that invest in MLPs can provide diversification while typically issuing a Form 1099 instead of the Schedule K-1 associated with direct ownership of an MLP. However, this may come at the trade-off of MLP exposure purity, tracking error, or less favourable tax treatment of distributions.
- While direct investment in MLPs may provide the potential for tax-deferred income, holding MLPs in tax-deferred accounts may generate unrelated business taxable income (UBTI). If the account’s aggregate annual UBTI exceeds $1,000, the account may be subject to tax. As a result, certain exchange-traded products that invest in MLPs may be more suitable for tax-deferred accounts than direct ownership of MLPs.
- Different investment vehicles that provide exposure to MLPs can face materially different tax treatment when it comes to both distributions and capital appreciation. Understanding these differences is an important part of evaluating MLP investments.
Related ETFs
MLPX – Global X MLP & Energy Infrastructure ETF
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Category:Income