Do investors who hold pipeline funds such as TYG and BGR get the same tax benefits as investors who hold stock in the individual pipeline companies? What about the paperwork for the IRS? Any insight is appreciated. Thanks.
I own shares of TYG and in 2004 all of TYG's distributions were classified as NONTAXABLE DISTRIBUTIONS and were reported in Box 3 of my 1099-DIV. There is no K-1 for TYG. Hopefully 2005 will be the same, all return of capital.
I don't own BGR, but that is a new fund with no prior tax history to go on so the the final characterization of their 2005 distributions remains to be seen. I would imagine that it will be somewhat different than TYG due to the different nature of its holdings.
TYG only owns MLPs, but BGR has a much broader investment mandate as stated in the prospectus and evidenced in the N-Q dated 07/31/05. At that time BGR held 22% in Canadian Trusts, and had holdings in 13 other foreign countries. BGR also holds some common stocks of integrated oil companies such Exxon Mobil, etc. Additionally, BGR writes numerous puts and calls on their holdings. So, you can expect a potpourri of tax characterizations ranging from qualified dividends, non-qualified dividends, nontaxable return of capital, and however they will handle the Canadian tax situation. You will not received a K-1 for BGR.