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Stocks 502: Unconventional Equities

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1.
If you are a mutual fund investor, you can invest in master limited partnerships.
Choose wisely. There is only one correct answer.
True. The government recently gave mutual funds the green light to invest in MLPs.
2.
Real estate investment trusts must distribute _______ of their taxable income to shareholders each year as dividends.
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At least 90%. By law, they must distribute at least 90%.
3.
As an investor in a royalty trust, you will generally have to pay state income taxes on your royalties.
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True. You are liable for income taxes in the states in which the trust generates its royalties--and that could even be multiple states.
4.
Which of the following is not an advantage of royalty trusts?
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Stable cash flows. Cash flows from royalty trusts are not predictable. Royalty trusts are affected by swings in production levels and commodity prices.
5.
Why have so many energy firms reorganized as master limited partnerships?
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To avoid double taxation of earnings. There is no counterpart to the corporate income tax. Owners of a partnership are taxed only once: when they receive distributions.