Elle wrote:
- quote -

Elle is right, you need to research these one by one. Some caveats to
keep in mind that the article may not have hit on (I don't read that pub):

1. Schedule E implies K-1 reporting so you'll need to wait to file until
you receive your K-1 which can be a pain in the neck (later than 1099s).

2. if you pay for tax prep, many preparers charge per-form even for a
relatively easy Schedule E

3. this type of security can require slightly complicated basis tracking
by each investor. It would be typical for basis to be adjusted downward
each year, and the tax treatment of distributions changes after your
adjusted basis hits $0. And the sale of a share with such adjustments
triggers ordinary income rather than capital gain to the extent of these
basis adjustments. But this is specific to each. More to the point, it's
another thing to spend time researching.

4. do you have any state tax issues to consider? Because it's a
pass-through entity, it's possible you need to file a state return in
another state because of the type of income, it depends on the trust.

5. factor in any costs of dealing with the above as a cost of ownership
that, in effect reduces your yield. For a small holding if your taxes
cost another $150/yr to prepare you could end up in the hole, relatively
speaking. People may not want to own small positions of these, just on
"administrative" grounds.

-Tad

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Elle wrote:
- quote -


Elle is right, you need to research these one by one. Some caveats to
keep in mind that the article may not have hit on (I didn't read it):

1. Schedule E implies K-1 reporting so you'll need to wait to file your
tax return until you receive a K-1, which can be a pain in the neck
(later than 1099s).

2. if you pay for tax prep, many preparers charge per-form even for a
relatively easy Schedule E

3. this type of security can require slightly complicated basis
tracking. It would be typical for basis to be adjusted downward each
year, and the tax treatment of distributions changes after your adjusted
basis hits $0. The sale of a share with such adjustments triggers
ordinary income rather than capital gain to the extent of these basis
adjustments. But this is specific to each.

4. do you have any state tax issues to consider? Because you're
receiving income from a pass-through entity, it's possible you need to
file a state income tax return in another state.

5. factor in any costs of dealing with the above as a cost of ownership
that, in effect, reduces your yield. People may not want to own small
positions of these, just on "administrative" grounds.

-Tad

------ Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.

On 2008-06-04 02:05:42 -0700, MyVeryOwnSelf <self[at]emailNot.nul> said:

- quote -

At one time these products were widely offered and were very popular
among small investors in Canada because of their high yield in a period
when interest rates were low. They were much sought by seniors seeking
more income when bank CDs didn't provide enough for monthly needs. But
beware. Part of the high yield was accounted for by "return of
capital," in other words part of your own money coming back to you.
Typically that feature was not mentioned in the sales pitches through
which these products were sold. Another feature that was not often
mentioned during the sales is that the products were very risky, as
risky as the underlying companies offering them. Many seniors reveled
in the big monthy checks that kept on rolling in, but then later tried
to sell their shares and had to take a loss.

If these products are coming into vogue in the USA, I do hope that the
US securities regulators are more alert to abuses than regulators in
various Canadian provinces who did little or nothing to stop abuses
when these products were all the rage.

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"MyVeryOwnSelf" <self[at]emailNot.nul> wrote
- quote -

Look for the web site for each one for tax info. For one,
the "profile" section of finance.yahoo's entry for each
often has a link. SJT's web site has a "tax info" section
that sends one to
http://www.sjbrt.com/files/2007_tax_info_book.pdf . This
booklet says income is reported on Schedules B and E, giving
exact instructions for the lines on each schedule to use.
CRT is similar:
http://www.crosstimberstrust.com/ima...7_Tax_Book.PDF

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There's a discussion of "energy income trusts" in July's Kiplinger Personal
Finance magazine (page 32).

Featured offerings are BPT, SJT, CRT, ERF, HTE (those are the ticker
symbols).

Does anybody know how these securities report distributions to investors?
1099-INT? 1099-DIV? K-1? Something else?

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