found it
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Total Operating Expense Ratio 2.44% Sales Load 4.50% Management Fee 1.00% Come muppets, donate some money to good old Goldman Sachs.
yea im not jumping in that shitshow. the first one was ok i think they needed a way to get more fees so they started another fund. ive been looking at CQH i think im gonna get in for the long run
I’ve been looking at LINE this morning. And still reading on TORTX.
That MLP website linked above has been very helpful. Appreciate it
whats your experience with K-1 are they a pain? do yu have to keep track of stuff yourself?
I’ve been looking at Legacy Reserves MLP (preferred stock, LGCYO), trading around $22 it’s looking tempting. But now I’m concerned about this K-1 hassle. It says it is not “qualified distributions” so it will be taxed at my normal income rate, and that I’ll receive a K-1 (though I have no idea what that is).
I’m moderately competent with accounting, will this K-1 crap be a huge hassle? I know K-1s are sent out late and am find with that, just wondering if it is a massive accounting job as I usually do my own taxes.
^First, thanks for repping the big city of Midland, where Legacy is HQ’d.
second, are you in the US? Do you file a 1040?
Yup, I’m an American and do a 1040 (not located in the states though).
i read about K-1s when i was looking at MLPs, they do look like a PITA, let your accountant handle that if you have one
Partnerships and S-Corps are not taxpayers. They do not pay taxes. Instead, all their income and expenses “flow through” to their owners, who do pay tax, either as C-Corps, individuals, or trusts.
The IRS requires that these income/expense items retain their character when they flow through to the taxpayer. The K-1 that you received from Legacy Reserves would show your portion of those income/expense items. It shows your part of the business income (that goes to Sch. E, page 2), interest and dividends (which go on Sch. B), royalties (which go on Sch. E), capital gains (which go on Sch. D), etc.
Some K-1’s are really easy, and some are incredibly complex. Legacy’s isn’t too bad. There are only three “real” items on theirs. Whatever software you use should be able to handle that one.
However, if you decide to invest in the Hatteras Core Alternatives Fund, I recommend that you find a good accountant. There’s so much information on that K-1 that nobody can really figure it all out, even if you have a hundred years of experience.
You could also avoid the whole tax issue by buying the asset in your IRA. But some of these MLP’s are already somewhat tax-advantaged, so that might be unwise.
What determines the complexity of a K1?
And isn’t there some problem with MLP’s in an IRA if amounts exceed some threshold?
It’s like porn. You’ll know it when you see it.
Some K-1’s only have one number–business income. This gets reported in Sch. E page 2. And that’s all.
Legacy’s K-1 has three “real” items on it. (There are “not real” items, like AMT stuff, which usually get ignored, DPAD (domestic production activities deduction) stuff, which you don’t get to take because it’s limited to wages paid, which are zero, etc.) The three “real” things are ordinary business income, intangible drilling costs, and royalties. However, the royalties also get reduced by depletion, which is a separate schedule that appears elsewhere in the package, but not on the front page.
Hatteras Core Alternatives Fund has
- Business Income (Sch. E page 2),
- Rental Real Estate Income and Other Rental Income (Sch. E),
- Interest and dividends (Sch. B), Royalties (Sch. E),
- Short and long-term capital gains (Sch. D),
- Unrecaptured Section 1250 gain (which is a reportible item on the AMT schedule),
- Section 1231 gain (which is subject to depreciation recapture at ordinary tax rates and goes on Sch. 4797 which flows through to Sch. D),
- debt cancellation (which goes on Pg 1 of the 1040 as “other income”),
- deductions from the aforementioned royalties (which reduce the amount that you put on Sch. E),
- IDC,
- Sch. A deductions that are subject to the “2% of AGI” limitation,
- Sch. A deductions that are NOT subject to 2%,
- foreign transactions that may (or may not) result in a foreign tax credit and generates a Form 1116,
- other portfolio income that gets reported as “other income” but is also subject to the NIIT (along with the interest, dividends, capital gains, royalties, and rents),
- swap gain (which, strangely enough, is NOT subject to the NIIT, but instead gets reported on the 4797 with the sales of other assets used in the business),
- US government interest (which is taxable to the federal return, but may be tax-exempt on your state return, depending on what state you live in, if you have an income tax),
- Section 179 depreciation expense (which is limited to the income of the activity that produced the income, and also limited to 100% of the taxpayers net income) which generates form 4562,
- Investment interest expense (which generates another form that I can’t remember),
- oil and gas depletion schedules, and
- non-OG depletion schedules.
And that’s just the federal portion of the return. They also generate K-1’s (or a similar schedule) for California, New Jersey, New York, and Pennsylvania. Even though you don’t live in any of these states, you may have to file an income tax return for that state, depending on the state’s de minimis rules.
Clear as mud?
And if the K-1 is held in an IRA and it has unrelated business taxable income of >$1,000, then the custodian of the IRA is supposed to file the tax return and pay the tax (at 39.6%) out of the IRA’s funds.
But it’s rare that I ever see that much UBTI. The client I’m looking at, for example, bought $285,000 worth of the fund, and it only generated $1400 worth of UBTI.
There are mlp closed-end funds selling at discounts. Might be worth a look.