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Phillips 66 Message Board

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  • sollid_companiess_only sollid_companiess_only Dec 13, 2012 12:42 PM Flag

    MLP Plans

    You make a big mistake when you give a 'thumbs down' to the concept of MLPs, without investigating the big tax advantages that they offer, the higher dividend payouts they offer, and the fact that the pps of the MLP will parrallel it's parent company. MLPs are a truly great investment vehicle.

    There are Many Tax Advantages for MLP Investments. Especially for the elderly (google tax advantages for MLPs). Many are not familiar with the tax advantages of mlp's, but they may be the most tax advantageous investment on the market, especially for senior citizen investors.

    MLP's generally pay out almost all of their net income in dividends, so they generally pay much higher dividends than stocks. And, for tax purposes, these divvys aren't counted as income, instead they are counted as a 'non-taxable return of capital', a reduction in the cost basis of your investment.

    Not meaning to be macabre, but the mlp investment vehicle could mean that elderly investors end up paying no taxes on their dividend payouts, none at all, if they die before their investment cost basis is reduced to zero. The time period it takes for an mlp to reduce the cost basis to zero is between 13 and 15 years. So, if an investor buys the mlp at, let's say, 65 years of age, then chances are that he/she will die before the cost basis is reduced to zero; many years of tax free dividends. But the neat thing is that the heirs will inherit the mlp investment, tax-free, and they can turn around and sell it tax-free.

    An elderly investor can make higher dividend yeilds with mlps, than with stocks, and also avoid the 15% tax rate on dividend stocks. For more info on the tax advantages of MLPs, just google 'Tax Advantages of MLPs'

    And, the share price of the MLPs generally rises/falls relative to its stock counterpart, in this case PSX.

    The dividends for MLPs are reported on K-1 forms, instead of 1099-Div forms, but they are quite easy to report for annul tax returns, using Turbo Tax or H&R Block software.

    MLPs WERE NOT designed to be held in tax deferred retirement accounts. With MLPs, you get all the advantages of a tax deferred account, without having to wait until you're 59 1/2 before withdrawing your money.

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