AMLP .... simplifying MLP investing

AMLP: An ETF Cautionary Tale

 Comment: To much to do a simple excerpt. Read the entire article at the link above. Excerpt:
MLP tracks the Alerian MLP Infrastructure Index, which is composed of 25 pipeline and processing MLPs. Owning MLPs outright creates a unique tax headache: K-1 forms must be filed in every state each MLP operates in. When an MLP pays a distribution to investors, the lion's share is treated as return of capital and is not taxed immediately. Instead, it is subtracted from the owner's cost basis. When investors sell shares, they pay the capital gains rate on the capital appreciation of the shares. They also pay ordinary income tax on the difference between the reduced tax basis and the original tax basis. Essentially, investors are able to defer paying taxes on distributions until they sell their shares. If the owner holds the MLP so long that the reduced tax basis reaches zero, any further basis reductions from distributions will be automatically taxed as a long-term capital gain. Distributions from ETN competitors are taxed immediately. Investors simply pay ordinary income tax on distributions every year. ....

AMLP handles all K-1s and sends investors a single 1099, which is much easier to handle. The ETF preserves the tax-deferred benefits of MLP ownership. When MLPs are held in a retirement account, they can become taxable, but owning AMLP in a retirement account circumvents these potential tax liabilities.
Additional information:
Final comments:
  • Two of my brothers-in-law introduced me to AMLP
  • We have them in our IRAs
  • What I like ....the 6% yield


  1. Lastest news on AMLP: MLP ETF Declares Q4 Dividend:

    In addition to high income, the advantage of MLP ETFs is they provide diversification, a single Form 1099, no K-1s, and investors can benefit from return of capital and qualified dividend tax treatment of distributions.

    AMLP charges an expense ratio 0.85% and has a 12-month yield of 6.01%.


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