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Linn Energy, LLC Message Board

  • ronharv ronharv Oct 17, 2012 1:22 PM Flag

    A LNCO Dividend Question

    I read what I believe are the Linn Co prospectus sections relevant to dividend payments, but can't determine if the dividends to individuals that aren't ROC are qualiifying dividends. Anyone know? And you provide an authoritative reference?

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    • Does anyone know when LNCO starts paying their dividend? Thanks.

      Sentiment: Buy

    • If priot K-1s for Linn can be used as a guide, approximately 1/6 of the dividends for LNCO will be ordinary income and the rest will be ROC.

      A question: is LNCO a good investment in taxable accounts?

      • 4 Replies to rlp2451
      • From an SA article today:
        However, owners of LNCO should be aware that distributions from LINE in excess of earnings and profits will be treated as a return of capital; and they reduce the basis in LNCO shares. The percentage of distributions that will be treated as a return of capital are expected to be between 40% and 100% through 2015. One good thing is that the calculation of earnings and profits is slightly different for LNCO than for LINE. Income is generally higher for LNCO since items such as accelerated depreciation and current deduction of IDC's are not allowed.

      • I got $2.74 a share for exchanging LINE units in a taxable account for LNCO shares, each representing a LINE unit. An even better deal than that was available today. Ronharv, your margin purchase of LNCO sounds like a wise move.
        As far as a purchase of LNCO without a simultaneous LINE sale in a taxable account, it seems like a LINE purchase would be better, unless avoiding the K1 hassle is that important to you rlp2451.

      • Because of LNCO's corporate structure I'd guess that Linn's K1s aren't a guide. I expect that any dividends that aren't ROC will be qualified dividends and not ordinary income. So I think that LNCO can be a nice investment in regular accts., especially for folks like me who have capital loss carryforwards that will make the ROC portion, in effect, tax free. If memory serves, I think that Linn Co stated that up to 60% could be ROC. But 100% would be just fine with me as I've purchased LNCO on 3 1/4% margin (tax deductible) to lever a (I hope) largely non-taxed 7%+ income. Also, the 2% to 5% tax that Linn Co expects to pay will hold until 2015. Perhaps the expectation of future fed and state taxes that are a lot heftier than they'll be the next few years will keep LNCO a couple of points or more lower than LINE. Finally, if Linn has as good a 2013 as they suggest is possible, then both will rise nicely.

      • Just go to page 32 of the LNCO presentation rather than insist on misinforming fellow Americans.

        For the first couple of years the only taxes expected to be paid are 2% to 5% AMT. The rest is ROC. Also detail on the next few years but it really depends on how much additional investment and therefore depreciation shields the partnership decides.

        My goodness absolutely no shame and you do know what that means.

    • "And can you. . . ." not "And you. . . ."

      • 1 Reply to ronharv
      • I believe I've answered my question from Edgar-Online:

        "Distributions that are treated as dividends generally will be taxable as ordinary income to U.S. holders but (i) are expected to be treated as “qualified dividend income” that is currently subject to reduced rates of U.S. federal income taxation for non-corporate U.S. holders and (ii) may be eligible for the dividends received deduction available to corporate U.S. holders, in each case provided that certain holding period requirements are met. Qualified dividend income is currently taxable to non-corporate U.S. holders at a maximum U.S. federal income tax rate of 15% for taxable years beginning before January 1, 2013. Thereafter, qualified dividend income will be taxed at ordinary income rates unless further legislative action is taken. The reduced maximum tax rate on dividends will not apply to dividends received to the extent that the U.S. holder elects to treat such dividends as “investment income,” which may be offset by investment expense."

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