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1.
Cash flows from master limited partnerships tend to be _______.
Stable. MLPs tend to be be very stable and produce consistent cash flows over time.
2.
Why do nearly all royalty trusts have above-average yields?
They are required to pay out essentially all of their cash flow as distributions. This results in relatively large yields for investors.
3.
Since real estate investment trusts do not hold property directly, they do not pay property taxes.
False. They do actually pay property taxes, and those taxes can eat up a big chunk of their operating expenses.
4.
What will eventually happen to the distributions that royalty trusts pay their investors?
They will disappear. Resources are finite; therefore, they will run out eventually.
5.
Which of the following is true regarding the tax treatment of master limited partnerships?
The owner might have to file tax returns in the states where the partnership operates. MLP unitholders pay regular income tax annually on their share of the partnership's net income.
