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Forced Selling Continues - Cramer's Mad Money (10/23/08)

KMP is a limited partnership. Instead of an IRS 1099 at the end of the year you will receive a K-1 form. A portion of the income you receive from LPs is considered by the IRS as business as opposed to investment income. The IRS will allow up to $1000/year of this type of income inside a qualified plan (i.e. tax-advantaged plans such as IRAs, 401Ks, etc.). For this reason, and the fact that these sorts of partnerships throw off dividends that are considered return of capital and so are not taxed and therefore do not benefit from being inside a tax deferred vehicle, these sorts of investments belong outside of your IRA or 401K.