A master limited partnership (MLP) is a publicly traded partnership that receives preferential tax treatment if at least 90% of its gross income is from qualifying sources. Qualifying income includes “…income and gains derived from the exploration, development, mining or production, processing, refining, transportation (including pipelines transporting gas, oil, or products thereof), or the marketing of any mineral or natural resource (including fertilizer, geothermal energy, and timber)….”1 More simply put, MLPs provide investors with the liquidity of stocks with the income stability of bonds, with a preferential tax benefit.
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1. U.S. Code, Title 26, Internal Revenue Code, Subtitle F, Chapter 79, Subsection 7704.