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Master Limited Partnerships

In: Business and Management

Submitted By michaelv63
Words 2235
Pages 9
Equity Research Report
Sector: Master Limited Partnerships (MPLs)
Stock: MarkWest Energy L.P. (NYSE: MWE)

The sector that this research report will cover is Master Limited Partnerships (MLPs) and the stock within this sector is MarkWest Energy Partners, L.P. (MWE). Master Limited Partnerships is a business that has the tax structure of a partnership, but the ownership equity of the business trades on an exchange. In the MLPs sector, a unitholder is someone who owns stock in the company, making them part owner of the business. MLPs have two different kinds of partners, general partners and limited partners. General partners manage the daily operations of the business and own a small stake in the company. The group that has a larger stake in the company is the limited partners, who have no role in management, but they provide capital to the company and receive regular cash distributions in the form of dividends. The majority of MLPs are oil and gas midstream and downstream activities such as gathering, processing, transportation, storage and refining of oil or natural gas. The structure of how MLPs are set up allows them to avoid corporate income tax. Instead, MLPs flow income and losses through to the limited partners, which is the equity stake of the company. With this structure, unitholders pay taxes on their own individual tax returns, which provides MLPs the flexibility and opportunity to raise capital directly from the stock market by issuing new shares. In order to qualify for partnership tax treatment, an MLP must generate at least 90% of its income from “qualifying income” as defined by Section 7704(d) of the United States Internal Revenue Code of 1986. A wide range of natural resources operations fit within this definition, including the exploration, development, mining, production, processing, refining, transportation, or marketing of any…...

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