The Help Desk

Your tough questions. MONEY's smart answers.
Presented by

What are the downsides of limited partnerships?

November 23, 2012: 6:30 AM ET

Are there any downsides to investing in a limited partnership, as opposed to stocks? — Mike Davis, California

In a nutshell, yes. Though master limited partnerships — which earn income chiefly from real estate, natural resources, and commodities — often yield more than shares of their plain-vanilla corporate cousins, they have their drawbacks.

Legal intricacies make filing your tax return confusing and time consuming. MLP income over $1,000 in a retirement account is taxed. And because of the way an MLP's tax basis is calculated, you could face a surprisingly big capital gains levy when you sell.

Another minus: MLP investors generally have less control over management than do a public company's shareholders, says New York City CPA Ryan Himmel. So, buyer, beware even more than usual.

— Susie Poppick

Got a question for the Help Desk? Send it to helpdesk@cnnmoney.com.

Posted in: Investing, Taxes
Join the Conversation
Help Desk

Got a question about your money? We want to hear it! Each week we're answering your questions on CNN, Headline News and CNNMoney.com.

Your email or phone number won't be published; we'll use it to get in touch if we need more information about your question.
Help Desk Video
  • NEXT
    Not enough money in America's 401(k)s
    Despite the surging stock market bringing balances to record highs, the average Fidelity 401(k) account has less than $100,000 in it. That's just not enough. Play
  • NEXT
    BACK
    Explaining Obama's myRA
    President Obama unveiled a new savings plan for retirement accounts, aimed at encouraging people to start building their nest egg. But how exactly does it work? Play
  • NEXT
    BACK
    Tricks on how to save in your 20s
    Saving for your retirement in your 20s doesn't have to be a financial burden. Prioritizing your expenses is usually the first step in building a nest egg. Play
  • BACK
    Don't get fooled by Black Friday sales
    Here are some of the tricks that retailers use to make you think you're getting a deal. Keep an eye out for them while shopping this Black Friday. Play
Best Tips
Some of the nation's leading business owners, investors, and thinkers share their thoughts on rebuilding your wealth. More
These strategies can help you manage the challenges -- both emotional and financial -- of helping an aging parent from afar. More
You don't need to be fanatical to get to 780. Those in the know say these moves matter most. More
Featured Newsletters

Tips for saving and spending smarter.

Search This Column
View all entries from this: Week, Month
Help Desk
More help for your career, your investments and your budget.
Powered by WordPress.com VIP.