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Master limited partnership investors may face K-1 tax complexity

MLPs like Enterprise Products Partners generally issue K-1s instead of 1099s, which can delay filing and may add extra work for investors.

Reported · Written up by our desk · Fund Industry

ETF Trends highlighted a tax wrinkle that can affect some investors, pointing to master limited partnership, or MLP, structures and the documentation they require.

The outlet said Enterprise Products Partners, an oil pipeline company, is organized as an MLP and therefore provides a K-1 rather than a 1099 for tax reporting.

According to ETF Trends, MLPs are required to derive at least 90% of their income from qualifying natural resource, energy, or real estate sources, and that income is passed through to unitholders, the investors in the structure.

ETF Trends also noted that K-1s can be issued only in the first week in March, can include more layered entries such as boxes that may require full statements labeled “STMT,” and that owning MLP units in a tax-advantaged account can trigger unrelated business taxable income, or UBIT, tax.

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