No Longer Masters Of Their Domain?

If you were lucky enough to discover master limited partnerships or MLPs you had returns of more than 40% last year.

These securities, which pay out more than half their earnings as dividends, have been on fire in this turbulent market.

But don’t call your broker just yet; they took a turn for the worse last week.

Fears are growing that newly proposed taxes combined with the expiration of the Bush tax cuts may take these names down.

Here’s why:

In an MLP, instead of paying a corporate income tax, the tax liability of the entity is passed on to its unitholders.

Once a year, each investor receives a K-1 statement (similar to a 1099-DIV form) detailing his or her share of the partnership's net income, which is then taxed at the investor's individual tax rate, writes the website Investopedia.

Seems like a sound reason to steer clear of these names.

Except Raymond James analyst Darren Horowitz doesn’t buy it. He tells the desk, tax increases won't have a disproportionate impact on MLPs.

"It's going to impact everyone the same. It's not going to have any greater impact on MLPs versus any other yield based equity and that includes utilities and REITs," he says.

Horowitz suggests any a dip presents buying opportunities: He’s bullish on two MLPs and they follow:
Enterprise Products Partners
Plains All American Pipeline

*It’s worth noting that MLPs may not suitable for retirement accounts due to other tax implications.

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Trader disclosure: On May 12, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (DRYS), (INTC), (TIE); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Kelly Owns (FXE) Puts; Kelly Owns (FXB) Puts; Terranova Owns (PFE), (GLD), (XCO), (SWN), (TER); Terranova Owns Gold; Karabell Owns (GOOG), (AAPL), (IBM), (CSCO), (TIE), (GS), (C); Levy Owns (GS), (GS) Calls

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