Are 10-86 Plans For You?
We have seen a big push lately on 10-86 plans. Some of the advertisements call them “gas pump payback plans” or “gas pump revenge”. But what exactly are 10-86 plans? I was looking around the internet to get some answers about this and found a pretty cool website call Penny Motion.
They have article there that discusses how to invest in 10-86 plans and some ways to find them. You can read it here. But what I was really looking for was, what the heck is a 10-86 plan? As it turns out, a 10-86 plan is an energy master limited partnership.
It looks as if they have become popularized from some tax loop holes surrounding real estate due to Ronald Reagan‘s Tax Act of 1986. Many of these loopholes have been used in oil and gas related investments. I looked up Master Limited Partnerships or MLPs for short, and found this at Investopedia:
“A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP’s cash flow, whereas the general partner is the party responsible for managing the MLP’s affairs and receives compensation that is linked to the performance of the venture.”
Also, it turns out that 10-86 plans may not be good to put in IRA’s as you can not take full advantage of the tax loop hole that the 10-86 provides.
In the article at Penny Motion it has this to say about the 10-86 plan:
“MLPs are investments that offer high yield and mix the tax “loophole” benefits of an LP (limited partnership) with the liquidity of an exchange listed common stock. MLPs have the structure of LPs but offer investment units that trade on an exchange. You could actually buy the units through your regular brokerage account. Because of the Tax Reform Act of 1986 put forth by the Reagan administration MLPs were formed around the energy sector, pipeline ownership in particular. But in order to qualify the MLP must derive 90% of its income from activities related to commodities, natural resources or real estate. Most MLPs trade on the large exchanges such as NYSE and NASDAQ and relate to US oil and gas infrastructure.”
I found this quite interesting as oil and gas pipelines are probably pretty vital as it literally takes an act of congress and more to get approval to build more. Even if they did get approval to build more pipelines, it would take a very long time indeed before its completion. So any pipeline MLP is probably sitting pretty right now. That’s just my take on the situation. Keep in mind I am not an financial planner or broker of any kind, so take my words here with a big grain of salt. However, maybe some of my research can help point you in the right direction.
I thought that this point here was a pretty big attraction to an energy MLP:
“The cash distributions made are not treated like dividends, you don’t get taxed when you receive them, but are considered to reduce the cost basis of your investment, this liability is deferred until you sell your units of the MLP.”
I find this highly attractive after just paying my taxes. So I am pretty “tax” aware right now. Hopefully you enjoyed this article and it helps you in your quest for the best stock market investment research when building your long term portfolio10-86 plan,10-86 plans,10 86 plan,10-86,what is a 10-86 plan,1086 plan,10-86 plans how to invest,what is the 10-86 plan,10 86 plans,10-86 plan pipeline