Publicly Traded Partnership (PTP)

What Is a Publicly Traded Partnership (PTP)?

A publicly traded partnership (PTP) is a business organization owned by at least two co-proprietors whose shares are routinely traded on a laid out securities market. A publicly traded partnership is a type of limited partnership managed by at least two general partners — including people, corporations, or different partnerships — and is capitalized by limited partners who give capital yet have no management job in the partnership.

A publicly traded partnership is like a master limited partnership (MLP); notwithstanding, there are minor differences. PTPs, generally in energy-related businesses, can offer investors quarterly income that gets favorable tax treatment.

Seeing Publicly Traded Partnerships

A publicly traded partnership consolidates certain tax benefits of a limited partnership with the liquidity of a publicly traded security. Publicly traded partnerships must participate in certain types of business as stipulated in the U.S. Code, including businesses connected with the utilization of natural resources, like petroleum and natural gas extraction and transportation.

To meet all requirements for publicly traded partnership status, 90% of the partnership's income must come from "qualifying" sources as illustrated in the Internal Revenue Code Title 26, Subtitle F, Chapter 79. Generally, those qualifying sources incorporate interest, dividends, real property rents, and any gain from the sales and disposition of real property.

All the more specifically, qualified income likewise incorporates any "income and gains derived from the exploration, development, mining or production, processing, refining, transportation (counting pipelines moving gas, oil, or products thereof), or the marketing of any mineral or natural resource (counting compost, geothermal energy, and timber), [or] industrial source carbon dioxide."

Likewise included is any revenue from transportation or storage of fuels, including biodiesel and other alternative fuels (the latest expansion), any gain from the sale or disposition of a capital asset, and any income and gains from specific commodities and commodity advances, futures, and options.

As partnerships, PTPs keep away from the statutory corporate income tax at state and federal levels, yet in the event that the 90% income threshold isn't met, the partnership is viewed as a corporation for tax purposes.

Publicly Traded Partnerships versus MLPs

The terms "master limited partnership" and "publicly traded partnership" are utilized reciprocally about a publicly traded company that decides to be treated as a partnership under tax regulations. Be that as it may, there are a few minor differences. Not all MLPs are PTPs on the grounds that some are not publicly traded (however most are).

A MLP addresses a layered limited partnership structure that might play various parts and levels of commitment for each partner (one partner might deal with the partnership while another may contribute capital). What's more, not all PTPs are MLPs; some could be publicly traded limited liability companies (LLC) that have chosen to be taxed as a partnership.

Investing in Publicly Traded Partnerships

As a partnership, PTPs don't pay tax and are, in this way, able to pass a greater amount of their income — through quarterly cash distributions — to investors compared to corporations. These payments might look like corporate dividends yet are taxed in an unexpected way (more well). This is on the grounds that they are treated as a return of capital to the partner (instead of income) and hence reduce the partner's basis with every distribution. This takes into account the utilization of depreciation and tax losses.

Features

• PTPs are like master limited partnerships (MLPs) however vary in tax treatment and shareholder structure.
• 90% of a PTP's income must come from "qualifying" sources as framed by U.S. Code.
• A publicly traded partnership (PTP) is a type of limited partnership wherein limited partners' shares are available to be unreservedly traded on a securities exchange.