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Linn Energy, LLC Message Board

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  • rrb1981 rrb1981 May 6, 2012 10:28 PM Flag

    Tax consequences of owning MLP's in an IRA account


    Agreed, I have seen many folks attack others for putting MLPs in an IRA because they would lose the tax advantage.

    The individuals that I help with their investments haven't cared. They received excellent capital appreciation and income with MLPs in their IRAs.

    Not only have they achieved results that have consistently beat the market, they have received a rising income stream and they worry very little about holding the mature, well capitalized midsttream MLPs.

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    • Hopefully you are not really ‘helping’ any one.
      Oil and infrastructure companies and MLPs in those areas have had exceptional runs simply because there was far more American energy than anyone dare dream. Also, investment restrictions have been lowered allowing more institutional money to flow into the partnership structures.
      Real market valuation is gone on cash flow not GAAO earnings. So all other things being equal MLPs will have a premium valuation to a corporation facing significant double taxation.
      Given the heavy IDRs most midstream mlps are now tied to acquisitions to exploit the tax advantage. So this of course is not the same game it was in this way too.
      So by putting a tax favored investment in a tax favored structure the math says a good portion of the valuation has been lost.
      Yes the trick to an IRA is tax free compounding. At the same time gains will be taxes as ordinary income while the owner will take the full brunt of a capital loss.
      Now you can continue on with your delusions of understanding. Clearly no amount of public humiliation or shame will deter you.
      The best assets for tax favored accounts are big steady growers where compounding in both retained and distributed earnings are almost certain. Big company stocks are nice as they have pricing power and therefore inflation protection.
      If it is a small investor they are likely they do not have enough portfolio value to achieve diversification. Taking risk without return is irrational and therefore irresponsible.
      If it is a high network individual they should keep tax advantaged investments in a taxable account. Investments which benefit tax free compounding with bond or bond like qualities in the tax sheltered account for compounding without capital loss. If you have a investment planner which does not structure you entire portfolio in this way, then it is time for a new planner.
      If you really do take advice from RRD run not walk away! He is smart enough to learn but his arrogance will not and may never will allow it.
      Now you and the rest of the OLB can return to group grooming. Wish you were unbelievable. Really.

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