Question 1

Is it better to own an MLP directly or through an ETF like AMLP?

Accepted Answer

Direct EPD holding produces $28,536 more over 20 years, even after accounting for K-1 complexity. The §199A deduction and §1014 estate step-up make direct ownership the clear winner.

Question 2

What is the C-corp tax drag on MLP ETFs?

Accepted Answer

MLP ETFs structured as C-corps (like AMLP) pay ~21% corporate tax on income before distributing to shareholders. This reduces yield compared to holding the MLP directly.

Question 3

Do MLP ETF holders get the §199A QBI deduction?

Accepted Answer

No. The §199A 20% QBI deduction only applies to direct K-1 income from partnerships. ETF shareholders receive 1099-DIV dividends, which do not qualify for QBI.

Question 4

How many K-1s does a direct MLP holder file?

Accepted Answer

A direct MLP holder receives 1 K-1(s) per year (20 over 20 years) with state allocations for ~20 states. An ETF holder files zero K-1s.

	Direct EPD	ETF (AMLP-style)	Advantage
20-year total distributions	$86,427	$67,684	+$18,743
Total tax paid	$8,682	$15,023	+$6,341
Effective tax rate	10.0%	22.2%	-
Estate step-up savings	$24,351	$5,104	+$19,247
K-1s filed (20 years)	20	0	-
State returns (20 years)	400	0	-
Complexity cost	$12,000	$0	-
Net economic value at death	$177,210	$136,674	+$40,536

Direct MLP vs ETF Wrapper

Direct MLP vs ETF Wrapper: 20-Year Comparison

Why the Difference?