This lists the holdings for the new Tortoise Energy Fund [XTYGX] which might indicate their favorites, as of Aug-31 :
MMP --- 800K shs = 3 % of float � $41 Mil
ETP --- 900K shs = 2 % of float � $39 Mil
SXL --- 840K shs = 6�% of float � $32 Mil
MWE --- 700K shs = 9�% of float � $31 Mil
EPD --- 1 M shs = <1% of float � $24 Mil
EEP --- 360K shs = <1% of float � $17 Mil
VLI --- 290K shs = 2% of float � $15 Mil
APL --- 0 shs
NBP --- 0 shs
Not sure I follow - you didn't buy stock, you invested in the business as a unitholder. Some of your distribution is a return of your initial investment, because the company didn't generate that much income. That's why your basis for tax falls - you're getting your money back when income isn't greater than what is being paid out to unit holders. If there are 337 million units outstanding, and they are supposed to pay out $1.58 per unit, and their income net of expenses doesn't equal the $580 million check they will write to the unitholders and General Partner, part of it is the money you paid in coming back to you. Total cash from operations in 2003 didn't come close to that $580 million even with depreciation added back in, so the rest comes from - selling more units, and borrowing.
Fortunately you are 100% wrong. The ROC is a tax concept but in this case it is not an economic issue. The company deducts from its income non cash items such as depreciation and that is the ROC. Maybe some tiny fraction is an economic ROC but the yield really is 6+%.
Just a reminder - the actual "yield" is the 6.55%, LESS the amount that represents the return of your own money. So if 80% is return of capital, then your actual yield is really 1.2%, which is what you should be comparing to the T bill rate.
Congratulations! Happy for you. YES. EPD is very safe investment. I love the yield - 6.55% currently. It is better the the 10-year note, but with a little higher risk. I think it is worthy for the risk. Hope your girls have wonderful weddings.
Another factor to also consider is that something like 80% of the distribution is already tax deferred. It makes no sense to own a mlp in an IRA. Save your IRA for highly taxedd interest payments.At least that's my opinion.
The taxes that your IRA account is required to pay will reduce the balance in your IRA account, which will reduce your tax-deferred or tax-free income. And, it's a hassle. In addition to the tax, the IRA will likely have to pay tax preparation fees, compounding the problem. So, you really want to look at any business investments with an eagle eye before you actually invest with your IRA funds. You could be buying yourself a big problem... not to mention a big tax bill.
Consider some of the challenges. If your IRA is illiquid -- fully invested -- it might not have the cash to pay the tax. If you pay the tax out-of-pocket, it's treated as a contribution to your IRA account, which might lead to excess contributions if you've already made a contribution for the year. So, if you decide to pay the taxes, you better hope and pray that they don't amount to more than $2,000 per year. Anything greater would be an excess contribution.
You can read the full article for more info - and the article is 'over the top' in its objections to UBIT in IRAs - but I have the impression the carmdog is UNDER the top in his/her concern about UBIT.
Before you invest in an MLP that produces UBIT in a tax deffered IRA account, one should understand the tax defferal that MLPs have in a non-IRA or non-tax deffered account.
See message 9325 on the KMP board - or look at the whole "tax question' thread.
Thanks for your input re: holding EPD outside the IRA. Altho I have other investments, I've been reluctant to use my available non-IRA funds for investment as I will be investing in weddings in 2005. My two daughters are getting married---one in Cabo San Lucas and the other in Rome, Italy. I figured that EPD is a relatively safe investment and probably worth the tax consequences within the IRA.
Holding EPD in your non-IRA account is almost the same holding it in your traditional IRA account (not ROTH IRA). You don't pay any taxes on the dividens earned while you hold the shares. You pay taxes on the dividen and the gain when you sell the stocks. It is better to hold it in a non-IRA account because you have no limit as how much to invest. Hope this will help.
You may well be correct, but I think that it will prove to be a worthwhile investment. For what it's worth, following is a list of their investments as of 8/31: