Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.


Buying an MLP fund? Look at its tax history

Funds invested master limited partnerships that have suffered losses this year may have an upside, benefiting from a tax write off, according to a report from Global X Research. A fund with more than 25% of its assets invested in MLPs is structured as a C-Corporation, and accrues corporate level taxes on the appreciation of its holdings. The report's main takeaways are below. -- Barron's

  • A fund with a tax asset will closely replicate its underlying index in a bear as well as a bull market until it reaches its zero point. Further upward movements beyond this point will result in the fund accruing a tax liability and it will lag the index.
  • A fund with a tax liability will lag the index in a bull market, but fall by less than the index in a bear market until it reaches its zero point. Downward movements beyond its zero point will be in-line with the index and the fund will accrue a tax asset.
  • A fund at its zero point will accrue a tax liability in a bull market and lag the index, or accrue a tax asset in a bear market and trade in line with the index.

Muni-bond appetite on the rise as clients seek tax-free safety

More clients are looking to add municipal bonds in their portfolios as they prefer safer investments in the wake of the Fed's decision not to raise interest rates, according to MarketWatch. In addition to its "defensive nature," this asset class also offers tax exemption on investors' interest payments. This bullish environment should spell well for the absolute value performance for munis, according to a report from Bank of America. -- MarketWatch

6 advantages of real estate investing for savvy clients

Are your clients taking advantage of all the tax benefits of owning real estate? Do they even recognize all the advantages?  Brandon Turner, writing in Entrepreneur, says that rental owners aren't subject to self-employment taxes, one of several unseen benefits from investing in real estate. -- Entrepreneur

Take an extra year to pay taxes thanks to this generous accounting rule

A client may report his or her income to the IRS either on a cash basis or an accrual basis – a choice that determines if the client can defer paying some taxes for a whole year, according to Forbes. The cash method, in principle, is not always the best method to choose although most small business owners go for this type of reporting. The accrual method of accounting is a little more complicated, but in the right circumstance can produce significantly better tax results. -- Forbes

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