Nine Funds Taxed As Regulated Investment Companies That Try To Keep Up To 25% Of Assets In Favorably-Taxed Master Limited Partnerships

Tuesday, September 24, 2013 17:48
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Nine Funds Taxed As Regulated Investment Companies That Try To Keep Up To 25% Of Assets In Favorably-Taxed Master Limited Partnerships

A small number of open- and closed-end mutual funds and exchange-traded funds invest in master limited partnerships. Although all of them are regulated investment companies (RICs), most flunk the tax test to qualify for tax treatment as funds and they end up being taxed as corporations.
 
That’s because, according to Internal Revenue Code Section 851(b)(3)(B), a fund can't own more than 25% in MLPs and receive the tax treatment of a fund or ETF.
 
However, a small subset of these MLP funds strive to pass the tax test accorded funds while providing the maximum exposure allowed under law to MLPs.
 
Bob Gordon mentioned in a webinar last week that he had a list of nine MLP funds that try to avoid exceeding the 25% threshold, and his list is presented below.These nine funds try to invest up to 25% in MLPs but do not exceed the 25% limitation to avoid being taxed a corporations. 
 
Gordon, founder of 21st Securities, says two are ETFs, two are closed-end funds, and five are traditional open-end mutual funds, adding that all nine issue 1099s—not K-1s. The list of funds:
 
FUNDs
TICKERS
Cushing Renaissance Advantage Fund
CRZAX,CRZZX,CRZCX
Eagle MLP Strategy Fund (EGLAX)
EGLIX,EGLAX,EGLCX
Famco MLP & Energy Income Fund
INFIX,INFRX,INFFX
Tortoise MLP & Pipeline-Inv
TORTX
Cohen & Steers Mlp Income An
MIE
Salient MLP & Energy Infrast
SMF
First Trust North American E
EMLP
Transamerica MLP & Ener-A
TMLAX,TMLPX,TMCLX
Global X MLP & Energy Infras
MLPX
 
Gordon’s webinar can be replayed by A4A members, and you can receive CFP, CIMA or CPWA CE credit. Gordon provided a number of ways to minimize taxation by investing in the right kind of securities, showing, for example, how you can even a plain-vanilla S&P 500 investment can be purchased in several different ways and some ways receive more favorable tax treatment.   

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