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1.
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.
2.
The prices of MLP units often change in conjunction with changes in _______.
Interest rates. Since MLP cash distributions are so steady, many investors treat them like bonds. Thus, when interest rates rise, bond and MLP prices tend to fall. This relationship is not perfect, but it generally holds over time.
3.
Royalty trusts invest mostly in assets in what sector?
Energy. Royalty trusts invest mostly in energy, which can yield high returns at times, but which are also volatile.
4.
For tax purposes, dividends from real estate investment trusts are allocated to _______.
All of the above. The situations for each of these returns differ.
5.
As an investor in a royalty trust, you will generally have to pay state income taxes on your royalties.
True. You are liable for income taxes in the states in which the trust generates its royalties--and that could even be multiple states.
