On 14 May I bought 250 shares of Enbridge Energy Partners, but only 3 days later I already sold them again.
Enbridge did announce the plan to offer 0,3083 Enbridge shares for 1 unit of Enbridge Energy Partners. This means a premium of zero %. Maybe in the future based on the percentage of unit holders which will vote against he merger there will be a little premium offered. I decided to sell the units and not wait for the closing of the deal. Without the high distributions I did expect to earn the fiscal paperwork is not worth it for me to wait for the chance on an improved merger proposal.
I bought the units at $9,78 and sold them at a price of $10,15. A 3,8% profit.
This week I bought 250 shares Enbridge Energy Partners at a price of $9,78. The current distribution of Enbridge Energy Partners is $0,35 per quarter. With this purchase I add $350 to my yearly estimated dividend income, but because I’m not exactly 100% sure about the withholding rate and/or if the tax threaty rate with NL is used I deduct the MLP withholding tax rate of 39,6% for now and book in an estimated dividend income of $211,40.
Enbridge Energy Partners is an MLP, a limited partnership that is publicly traded. An MLP combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. To obtain the tax benefits of a pass through, MLPs must generate at least 90% or more of their income from qualifying sources such as from production, processing, storage, and transportation of depletable natural resources and minerals. In addition, real property rents also qualify.
An MLP is not paying federal tax, but as unitholder, Dutch/foreign unitholder, I now expect to fill out some beautiful papers called 1040NR / Schedule K1. Also I have to apply for an Individual Taxpayer Identification Number (ITIN). Reading up about this tax paperwork was challenging, because I really had a hard time finding information usefull for me as Dutch citizen.
This is my first and for now last purchase of an MLP. I will first check next year how things go regarding the tax return and based on my experience with filing for tax return I will decide if it’s worth adding more MLP units to my portfolio in the future or if the paperwork is just not worth it and it’s better to close this position.