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REDDIT

Master Limited Partnerships

O
Nov 27, 2025 · 20:29

Master Limited Partnership (MLP) distributions are considered a return of capital; consequently distributions won’t be taxed until shares (actually partnership units) are sold.

Investors (partners) will receive Schedule K-1 each year, which will need to be included in tax return. Not difficult with software or a paid preparer, but avoid if you don’t want to complicate your taxes.

Stock Lending should be avoided; distributions while shares are loaned are current year income. Not clear if or how stock lending affects K-1 (and I’m not willing to find out the hard way).

Finally, not recommended to hold MLP in a retirement account. It can lead to unrelated business taxable income.