Matt Badiali has uncovered very interesting news in a buried U.S. statute regarding shareholders of publicly traded partnerships. Mr. Badiali, a personal finance professional with a focus on natural resources investing, knows that there is a statute, 26 U.S. Code 7704, that allows energy concerns to send earnings on to their investors, on either a monthly or quarterly basis. The firms that can disseminate these earnings, under the aegis of this code, have to be “master limited partnerships (MLP)” involved in the natural energy sector, which is also why Matt Badiali is well aware of this.
MLP’s have 2 different types of partners within it. There are general partners, which as the name lends, oversee daily general operations of a fund. In addition, there are all the investors in the fund who are also considered partners, but they are limited partners. Investors are considered “unit holders” as opposed to shareholders, and it is through this unit-holder structure that required distributions are funneled to investors. MLP’s are not required to pay any type of a corporate tax, so the gross advantage is to be able to redistribute copious amounts of earnings to unit holders in funds that would otherwise have a date with the IRS.
MLP’s are most often found in stable, long-term growth industries, like the natural resource sector Matt Badiali covers. The fact that they have so much additional cash rolling around from their “no-corporate tax structure,” MLP’s can offer very high yields as compared to most every other vehicle.
President Nixon saw the United States as absolutely having to protect itself from over-reliance on foreign sources of energy, so he though the best way to induce investors to support domestic concerns in the natural resource sector was to give them the opportunity to make handsome returns. Matt Badiali is helping Americans invest in themselves and their future.
MLP’s are open to anyone with a few hundred extra dollars to invest, but the greatest rewards are found from investing larger amounts of money. Starting small, getting comfortable and then seeing the results should induce greater investing. Even more encouraging is that the only time a taxable event is recognized by investors is if they sell their units in an MLP, so the benefits are very clear on this type of smart investment.
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