I got rid of this POS at a loss, as soon as I did my taxes for 2011 and found they have structure to have all the taxes on the shareholder (minority partners). You end of paying much more in taxes than you receive in dividends. I owned 3000 shares for 3 1/2 months in 2012. I ended up getting $630 in dividends but was responsible to pay tax for $2510 as interest income (line 5 schedule K) $50 in business income (line1 Schd. K) $850 in other gains, AMT $240 . In total it made me responsible for $950 in taxes. If you do not have this in a tax sheltered account or going to buy this in a tax sheltered account, STAY AWAY!!!!!!
Check out other posts regarding this for 2011, 2010.
Well, you have to engage in a prohibited transaction (borrowing money from your IRA or distributing all the assets of an IRA--both rarities for the typical investor) to lose the tax exempt status of the income:
(A) In general
If, during any taxable year of the individual for whose benefit any individual retirement account is established, that individual or his beneficiary engages in any transaction prohibited by section 4975 with respect to such account, such account ceases to be an individual retirement account as of the first day of such taxable year. For purposes of this paragraph—
(i) the individual for whose benefit any account was established is treated as the creator of such account, and
(ii) the separate account for any individual within an individual retirement account maintained by an employer or association of employees is treated as a separate individual retirement account.
(B) Account treated as distributing all its assets
In any case in which any account ceases to be an individual retirement account by reason of subparagraph (A) as of the first day of any taxable year, paragraph (1) of subsection (d) applies as if there were a distribution on such first day in an amount equal to the fair market value (on such first day) of all assets in the account (on such first day).
(3) Effect of borrowing on annuity contract
If during any taxable year the owner of an individual retirement annuity borrows any money under or by use of such contract, the contract ceases to be an individual retirement annuity as of the first day of such taxable year. Such owner shall include in gross income for such year an amount equal to the fair market value of such contract as of such first day.
Cramer continues to short KFN by re-hashing the same "hold" recommendation word for word story for the last 2 months (after he recommended it as a buy before that). The 2013 earnings and distribution release next week will give us a clue as to its direction in today's market. JMO