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Larry Sohl

Larry Sohl
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  • MLPs - A Reality Check ? [View article]
    No matter how I slice it, I still must disagree with you assessment that there is double taxation.

    Using your example: You bought something for $100,000. You sold it for $200,000. And in the meantime, you collected $175,000 in payments. If this was a regular stock with non-qualified dividends, you'd be paying capital gains rates on $100,000, and ordinary income rates on $175,000. And by your numbers, this is exactly what you are doing with this MLP! The only funny thing is the timing of those payments.

    After your cost basis goes to zero, you pay capital gains rates on the last $75,000 in distributions. I agree 100%, that the $75,000 is 'earnings disguised as ROC'. At the time of sale, you show paying $25,000 at cap gains rates, and $175,000 at ordinary income rates. This 'recapture' isn't double taxation. It's simply correcting an earlier error. The $75,000 in initial distributions should have been taxed at ordinary rates and wasn't, and to make up for this at the time of sale $75,000 that should have been taxed at cap. gains rates is taxed at ordinary rates.

    Bottom line, when all transactions are complete, you had a total of $100k in cap. gains, and were taxed on $100k in cap. gains. You had $175k in ROC's/distributions, and you were taxed at regular rates on $175k in income. I still call this an advantage, and definitely not double taxation. Your tax bill was delayed.

    ...unless you can show me that you are paying more than cap. gains on 100k of income, and ordinary rates on 175k of income. In which case I will gladly eat crow.
    Mar 26, 2013. 12:47 PM | 8 Likes Like |Link to Comment
  • MLPs - A Reality Check ? [View article]
    Simplify and clarify for me, if you can, using the example we've been discussing. At the time of sale, by my fuzzy logic, paying taxes on $200,000. The difference between the sales price and your cost basis of zero. I recognize that some of this will be taxed at cap. gains rates, and some as ordinary income. Let's start there. Is that correct?
    Mar 26, 2013. 11:55 AM | Likes Like |Link to Comment
  • MLPs - A Reality Check ? [View article]
    For those complaining about the taxes, recognize that you're only paying taxes because the MLP just made you a boat-load of money. There is no free lunch. You pay taxes on ANY investment gain. However, with the MLP's you get the great advantage of delaying that payment for an extended period.

    Does it hurt to pay taxes when selling a long held MLP? Yes. But only because you've been raking in the ROC distributions for years and haven't had to pay a dime. Compare the tax hit and timing of the payments on MLP's to any other investment, and it is not a disadvantage, it is a strength. IMO.

    I've held MLP's for a long time. EPD, for example, has a 3, 5, and 10-yr return of 26%, 20%, and 14.4%/year. Compare that to the S&P at 12%, 5%, and 8%. I'm quite satisfied with the MLP's, even with perceived paperwork or tax quirks.
    Mar 26, 2013. 11:42 AM | 13 Likes Like |Link to Comment
  • MLPs - A Reality Check ? [View article]
    Yeah, something doesn't look right to me as well.

    In your example, you paid $100k for the MLP, got $175k in distributions, and are getting another $100k in profit from the increase in the sale price. In some way shape or form, you are going to pay taxes on the $275k in gains from this MLP. And that is what you are showing in your example. You are taxed on the $75k as cap-gain ROC after your tax basis goes to zero, and then you're hit with taxes on $200k at the time of sale. I don't see 'double-taxation'.

    Am I missing something?
    Mar 26, 2013. 10:50 AM | 2 Likes Like |Link to Comment
  • Cap-Gain Expectations For 4 Passive, Active And Active/Leveraged MLP Portfolios [View article]
    Fidelity's response (after several days....). Bottom line, they will not allow me (or anyone) to open a position with AMJ. Pathetic.

    "Thank you for your recent correspondence regarding the ability to trade certain securities within your brokerage account. I appreciate the time you took to contact us.

    Fidelity strives to offer a robust variety of securities to our customers and we are confident that our product offering is extremely competitive with the marketplace. As part of our responsibilities to our retail account holders, we continually review security products being offered to our retail brokerage customers to ensure that they are at least generally suitable for some customers, and that we are able to support them appropriately We look at several factors in this evaluation, including, but not limited to:

    1. Whether there are excessively complex or unique features, or unusual risks, and whether comparable securities that are less complex may be available
    2. Liquidity in the market place
    3. Quality and ease of access for retail customers to material available information about the securities
    4. Fees associated with the product

    As a result of these reviews, we occasionally decide to block opening transactions. Please note that we restrict only new opening transactions; we typically do not restrict the sale of any existing holdings by our retail customers.

    We are unable to provide a list of all securities that are currently blocked. However, if you wish to inquire if a security you hold, or intend to purchase, is blocked from opening transactions, you may contact a representative with this information and we can confirm if there are any restrictions in place when trading that security. "
    Jan 10, 2013. 09:20 AM | Likes Like |Link to Comment
  • Cap-Gain Expectations For 4 Passive, Active And Active/Leveraged MLP Portfolios [View article]
    Thanks. I appreciate the insight. Unfortunately, I'm still left with what I'd consider inferior choices. At least for my Fidelity Account.

    Disclosure: I tried to get a substantial position in AMJ.
    Jan 8, 2013. 10:50 AM | Likes Like |Link to Comment
  • Cap-Gain Expectations For 4 Passive, Active And Active/Leveraged MLP Portfolios [View article]
    They'll gladly let me buy KYE (closed-end), with it's ridiculous fees and tendency to stray from NAV. It makes no sense.
    Jan 8, 2013. 10:33 AM | Likes Like |Link to Comment
  • Cap-Gain Expectations For 4 Passive, Active And Active/Leveraged MLP Portfolios [View article]
    I suspected as much. I know this was a concern for AMJ. However, since JPMorgan announced that they were not going to issue new notes, there has been little difference between the actual price and NAV. The problem hasn't materialized.

    It's frustrating that Fidelity feels that they need to babysit my investment decisions. They are forcing me to either use another brokerage, or buy a different ETN with much thinner trading volumes, which in my mind is a bigger risk than the issues involving AMJ.

    I'd looked at AMLP or an ETF as an alternative, but the returns have not matched AMJ. Correct me if I'm wrong, but I presume this is due to the difference in how AMLP is taxed (as a corporate structure).
    Jan 8, 2013. 10:30 AM | Likes Like |Link to Comment
  • Cap-Gain Expectations For 4 Passive, Active And Active/Leveraged MLP Portfolios [View article]
    I have an additional account at Hewitt, and like with Schwab, I had no issues whatsoever opening a new position in AMJ.
    Jan 8, 2013. 10:03 AM | Likes Like |Link to Comment
  • Cap-Gain Expectations For 4 Passive, Active And Active/Leveraged MLP Portfolios [View article]
    I've owned AMJ. Interestingly, I was prevented by Fidelity recently from getting back into this. I got an error when attempting to make an online purchase. I got the run-around when I called. After a half hour on the phone, all I could get is that Fidelity had placed a 'block' on any new purchases of AMJ. For a reason they couldn't seem to explain, their risk management team had decided to 'protect' me by not allowing me to purchase what I wanted.

    I was not particularly happy with Fidelity. They would gladly let me buy MLPI or similar ETN's that have a much smaller trading volume, but for some reason singled out AMJ. I'm assuming it's because of AMJ's fairly recent decision to stop issuing new shares.

    Anyone else run into this?
    Jan 8, 2013. 07:36 AM | Likes Like |Link to Comment
  • First-Half Lessons For MLP Investors [View article]
    I'd avoid KYE. The fees are ridiculous (see above), and I don't quite see what you mean by using a DRIP to avoid all those fees. The KYE fees will still be there. You could just buy AMJ, paying ~5% yield with the management fees I mentioned above. Be aware that all quarterly payments are taxed as regular income, not qualified dividends. I'd personally just buy something like EPD. With auto reinvest, you get a 5% knock off the reinvestment price. With the reinvestment, your cost basis doesn't change. The growth is nice, and you'll pay little to no taxes on it until you sell. Be prepared for a big hit then.

    There is no easy answer. Everyone's tax and income needs are different, and MLP's can definitely confuse people.
    Dec 20, 2012. 08:41 AM | Likes Like |Link to Comment
  • Initial Jobless Claims: -9K to 363K vs. 369K consensus, 369K prior. Continuing claims +4K to 3.26M. [View news story]
    I know +300,000 is a nice scary number to throw at people in an election year, but that number is not particularly scary. Over the last 40 years, weekly unemployment claims have only been under 300,000 about 8% of the time. Under 300,000 simply isn't normal.

    Sorry if that puts a dent in your desired 'sky is falling' story.
    Nov 1, 2012. 11:24 AM | 2 Likes Like |Link to Comment
  • ADP Grossly Overstates Job Growth For Last 12 Months By 419,000 Jobs [View article]
    So your conclusion is... that job growth is lower than what many think? You seem to have no faith in ADP, the BLS, or TrimTabs. If not, on what are you basing your conclusion that there was no "genuine recent hiring spurt"? Tarot cards?

    Believe me, I'm all for questioning the data. People pick and choose and skew data to fit their agenda. But if you are questioning three separate sources of employment data, what do you base your thoughts on? What source of information leads you to simply conclude "I do not buy that story"?
    Nov 1, 2012. 10:58 AM | 2 Likes Like |Link to Comment
  • First-Half Lessons For MLP Investors [View article]
    Exactly why I own the MLP's directly. Return of Capital issues? I guess you'll have to explain. I didn't realize that was an issue. In fact, it's the main reason many buy the MLP's directly, as the ROC is a means to delay tax payments on gains. Paperwork? It costs me nothing, and TurboTax readily handles MLP paperwork. The paperwork burden is perhaps 5 minutes per MLP.

    Per Morningstar, AMJ, with fees of 0.85%, returned 24.66% over the last 3 years. KYE 23.02%. 1 Year returns are also comparable. I don't like ETN's or AMJ, but it has much lower expense ratios and performs similarly. How can you give away the extra 3.5% in exorbitant fees?

    FYI, I hold neither AMJ or KYE, although I did in the past. I've learned. I hold MLP's directly, in both taxable and deferred accounts.
    Aug 17, 2012. 08:51 AM | 1 Like Like |Link to Comment
  • First-Half Lessons For MLP Investors [View article]
    Just a side comment on KYE... why would anyone willingly pay 4.3% in expenses to own this, when there are so many other ways to take advantage of the MLP sector?
    Aug 16, 2012. 06:43 AM | 2 Likes Like |Link to Comment