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Hunker down; a Tsunami of MLP Tax Liability may be on the Horizon

The 2016 Presidential Election is over and President-Elect, Donald J. Trump, will take over as Commander in Chief in January 2017.  The market’s initial reaction to Trump’s ascendancy has been extremely positive; however, it appears that pricing pressure remains in the oil and gas industry.  As 2016 comes to an end, many investors will meet with their trusted tax and estate planning professionals, assess their portfolios, adjust their estate plans, grind their teeth with the dreaded tax bill and pray for the best.  During the pow-wows with your trusted advisors, you may need to discuss your investments in Master Limited Partnerships – good luck! The Securities Arbitration and Investment Litigation Lawyers at the Silver Law Group, Law Office of David Chase, LLC and Ciklin Lubitz & O’Connell (www.oilgasfinraarbitration.com) are currently investigating cases relating to investments in oil, gas and energy linked Master Limited Partnerships (“MLPs”).

MLPs are often associated with oil, gas and energy companies and have been promoted in this low interest rate market as offering an attractive source of dividend income for many years now.  It’s important to note that the over 100 publicly traded MLPs are structured generally such that they pay no corporate taxes but rather pass along certain tax burdens, along with a share of their income (via dividends) directly to investors through units of ownership, not shares.

Since 2014 and the precipitous decline in the price of oil, the value of many MLPs has also significantly declined.  Many MLP issuers are currently teetering on the verge of insolvency and a record number of oil and energy companies (many of them structured as MLPs) filed for bankruptcy in 2015.  Affected investors are finding they have not only suffered a loss of principal, but they may also owe additional taxes on debt that is restructured or forgiven in a MLP bankruptcy or reorganization.

You will soon begin receiving those annoying, and often times complicated, K-1s in connection with your MLP investments.  We have found that most investors do not invest in one or two MLPs, but are encouraged by their financial advisors to investment in many.  The multitude of MLPs undoubtedly frustrates your CPA and causes you to incur higher tax preparation fees.  However, for 2016, in addition to you coming to grips with the principal losses in your oil, gas and energy linked MLP investments, paying your CPA higher fees to sort through and prepare your returns, be prepared to pay additional taxes for the receipt of forgivable income.  This issue has been the subject of various news articles earlier this year, including articles published by The Wall Street Journal and The New York Times.

While the our lawyers are not qualified to give tax advice, the licensed financial advisors who may have sold you the MLPs are required to (1) take into account your tax status upon the recommendation to buy, sell or hold a MLP; and (2) your advisors and their firms are tasked with disclosing the potential risks (i.e. tax consequences) of such an investment.  We are finding that firms and advisors have not properly disclosed such risks and may face potential liability.

Our lawyers have litigated hundreds of cases through FINRA arbitration and won millions of dollars on behalf of aggrieved investors.  Our lawyers represent investors nationwide in securities cases and FINRA arbitration to recover investment losses.  There is no fee unless we recover money for you.

For more information about the law firms, the lawyers, and our oil and gas investment practice area, please visit our website at www.oilgasfinraarbitration.com.  Contact Scott L. Silver at (800) 975-4345 for a free, confidential consultation.

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