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How Trump's Tax Plan would Boost MLPs

The White House tax proposal announced April 26, 2017, would tax income from pass-through entities (MLPs) at a 15% rate instead of the individual's ordinary income tax rate.  The Trump Proposal would, therefore, make MLPs a more lucrative investment by decreasing the amount of tax paid by the individual owner. Currently, an investor in the 39.6% tax bracket with  $100 of ordinary income from an MLP  would pay $39.60 in Federal income taxes.  Whereas with the Trump proposal, a  $100 of income would only require taxes of $15.

If this proposal made into law, it would be a tremendous benefit to MLP investors. Distributions that are currently tax-deferred would stay the same.  However, if you sold an MLP, the deferred income would be taxed at 15%.  The government would also tax the ordinary income at 15%.

For investors looking to invest in MLPs, the following should be good news:  According to the Energy Information Administration (EIA), an oil shortage is feared by 2020 due to lack of new development in the era of low price oil.  American shale producers would not be able to offset the shortfall.  This shortfall in supply would be very positive for MLPs since there has been a correlation with oil and the price of MLPs. Here is a link to the article:

 

https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000

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