“Gaspump Revenge” thanks to Reagan, using “10-86 Payback Plans”

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Gas prices have come in a little bit from the spike levels we saw earlier in the year, but the price at the pump is still one of the economic indicators that has the biggest impact on us — the prices are in huge, bold numbers on signs all along our roadways, and the routine of buying gas and watching the dollars tick by on the pump means that watching the dollars flow out of your pocket at the gas pump is one of the more vivid ways that the decline in the American standard of living, or at least the decline in the dollar’s purchasing power, hits our psyche.

And the newsletter copywriters know this, of course, so there’s a long history of using the idea of getting “payback” or “refunds” for those regular and irritating gas purchases. In the past this has almost always been a thinly-veiled way of saying, “If you’re sick of paying so much for gas, just buy some oil stocks so you actually benefit from the other side of the deal, too.”

This isn’t too different in concept from the “claim your gas rebate check” teaser that the Oxford Club ran for a long time a couple years back, though that one teased specifically the Canadian Income Trusts, which don’t exist in the same way today.

So what is Jim Nelson pitching today? He’s got an ad running for his Lifetime Income Report that tells us we can get a little “Gaspump Revenge” if we follow his advice and use a “little known ‘loophole’” signed into law by Ronald Reagan. Which means the more astute among you probably already know what we’re talking about — but don’t spoil the surprise for the rest of the class!

And yes, I’m just thankful that Nelson has stopped running the Scandinavian Income Certificates ad that was so pervasive for a year or so that it made up most of my “questions to answer” pile for weeks at a time. It’s nice to see something new!

Here’s how Nelson pitches his idea for these “10-86 Plans:”

“Around here, we call it the ’10-86 Plan.’

“Some also call it the ‘gaspump payback.’

“I explain why in just a second.

“But whatever you call it, you can thank none other than Ronald Reagan for creating it.

“And you might also have Ron to thank for saving your retirement.

“In fact, thanks to what Reagan did on October 22, 1986 you might even use this technique to build a small fortune.

“This might be the best part: it’s ‘Big Oil’ that could foot the bill.

“How so?

“See, it was Reagan who helped slip a special ‘loophole’ law many years ago. Surprisingly, this ‘loophole’ remains wide open today.

“And a few Americans are already using it to pile up fortunes.

“Many more have tapped it to collect up to three times as much regular income for retirement. So what exactly is a ’10-86 plan?’”

He then goes on a long spiel about how buying big oil companies can be great when prices are going up, but they suffer when prices decline … and worse, their dividend yields are minimal enough that they don’t return much cash to shareholders.

So, naturally, he’s got a better idea:

“If you draw from that energy-backed wealth anyway, doesn’t collecting triple the yields from a “10-86 plan” sound like a good idea? Of course it does.

As Smart Money puts it,

“['10-86 gaspump payback plans'] are producing some of the best yields anywhere… some of the sharpest investors in the field are expecting double-digit total returns for some time to come.”

“And it’s not just the bigger payouts where ’10-86 plans’ and stocks part ways.

“See, unlike regular ‘Big Oil’ dividends, these ’10-86 plans’ can help you…

“Collect energy-backed income, even if gas and oil prices crash

“How could that be?

“I’m sure you know that Big Oil companies own the gas and oil they sell. That’s one of the big reasons why they take a big hit when oil prices drop.

“But not ’10-86 plans.’

“They’re energy backed, yes. But they typically don’t own any oil or gas. Instead, what the ’10-86 plan’ operators do is get paid to move the oil and gas around the country.

“You see, ’10-86 plans’ were created to build the 385,000 mile pipeline network that flows fuel back and forth across the U.S.”

So yes, this is another pitch for pipeline companies — which in almost all cases are publicly traded master limited partnerships (MLPs), another class of investment that we see pretty heavily teased from time to time.

And yes, MLPs in their current form were signed into law under Ronald Reagan in the mid-1980s, though they had been around for a while before that — thanks to some scandals and limit-pushing they lost money for many individual investors prior to the re-regulation of MLPs in the Tax Reform Act of 1986. No, I don’t know of any “10-86″ section in that Tax Reform Act that created the current crop of MLPs, but I suspect that Nelson and his copywriters pulled the “10-86″ from the fact that the tax reform act was, in fact, passed into law in October … the tenth month … of 1986.

MLP investing is not without its downsides, but the basic idea is that they were set up to encourage investment in energy infrastructure, and therefore they carry some tax advantages — they distribute the vast majority of their income to unitholders as taxable personal income, and in exchange they don’t pay corporate tax. Sort of similar to the way REITs are set up to invest in real estate and pass all the income through to individual shareholders, who then inherit any tax liability for that income.

But it actually works out quite a bit better than that, tax-wise, because pipeline companies almost never actually make much money in a taxable sense — pipelines are very expensive to build and carry big depreciation charges, so if you assume that the maintenance of the pipes doesn’t actually cost nearly as much as the depreciation charges, then there’s actually a huge amount of cash flowing through that’s considered “profit” by most of these firms but is not taxable income. And by “profit” I mean “distributable cash,” which is the term most of these folks use — the money that they take in but don’t need for operations, and which can be distributed to unitholders.

So in practice, all MLPs that I’m aware of pay out way more in distributions than they earn in taxable income — which would be a red flag for a regular corporation but doesn’t necessarily indicate an unsustainable distribution for a pipeline partnership (as long as they’re not skimping on maintenance or failing to grow or upgrade their network). Those payments to unitholders have to show up in the balance sheet somewhere, so they are called “return of capital.” And return of capital does not generate a tax liability in the year that you get it, it just lowers your costs basis in the shares.

So you owe taxes on that as a capital gain when you sell, because over time it decreases your taxable cost for buying the units of the partnership and increases your capital gain on the sale of those units. I’m NOT A TAX EXPERT so take all of that with a grain of salt, but all of that is also why some investors shy away from MLPs — they are complicated, they sometimes require extensions in your tax filing as partnerhip K-1 filings sometimes come quite late, and they require good recordkeeping. But in exchange for that, you get some substantial tax advantages that you don’t get for holding an ETF or fund of MLP shares (especially, as I understand it, for estates … but I won’t go into those details here in fear of muddying the waters or giving you bad info).

Oh, and yes, as Nelson also goes into in some detail, MLPs have beaten the pants off the stock market over the last 20 years or so thanks to their generally consistent returns and the underlying assets that they own — they’re kind of like slightly sexier utility stocks. The energy infrastructure of the country is used every minute of every day, returns vary as different parts of the pipeline network get more volume with new discoveries, or as energy usage overall ebbs and flows, and regulated pipelines see varying levels of pricing control, but it’s not something that turns on a dime or suddenly starts losing money, and they exist to return cash to unitholders so the yields are almost always above average.

Of course, that means that MLPs carry some of the same sort of risks as most other income-focused investments: the share prices adjust to make the yield competitive, so with bond prices very high and bond yields very low, MLPs look awesome with a 6-7% yield … but there’s certainly some risk that if rates climb in the coming years (doesn’t seem like a big risk at the moment, but it will probably happen eventually), then MLP yields would have to climb as well to look relatively appealing to income-focused investors.

And while the income yield from MLPs typically goes up a little big every year, the only way that most of them see big adjustments to drive up their yield is by having the unit price drop.

With the Fed trying like crazy to bring down long-term rates, and with short-term rates already at zero for the next couple years, we’re promised, that’s not exactly a huge fear — and MLPs are asset-intensive, so if inflation drives up bond yields it ought also, over time, to drive up the value of the pipeline networks that MLPs mostly own, and to drive up the rates that they can charge their customers. So there is some protection from the kind of inflation that spikes bond yields and often makes other income-focused investments also drop in value.

But I’ve put the cart before the horse, no? I haven’t even told you which MLPs Nelson is teasing — and that, after all, would be the point of having a Thinkolator on standby in the first place. So … Nelson teases three different “10-86 ‘Payback’ Plan’” investments, let’s see what they are. Clues please!

10-86 ‘Payback’ Plan” #1 In One Move, Make Shell, Exxon, and Chevron Pay You to Retire

“You could get paid to retire by ExxonMobil, Chevron, ConocoPhillips, BP, Marathon Oil, Shell, Dow Chemical, Spectra Energy, and more… all with one market play….

“This is a gigantic pipeline network — one of the biggest in America.

“In fact, it’s so vast, that as a partner you would share control over 50,200 miles of pipe. That’s enormous. It dominates 95% of all the fuel refining operations east of the Rocky Mountains.

“The guy who put this first cash-paying partnership together used to work oil rigs himself. But he had an idea that pipelines were the better way to get rich.

“So he got started, with just a truck and $10,000.

“But he was among the first to form a ’10-86 plan,’ thanks to the Reagan “loophole.” And he quickly became a billionaire many times over….

“What’s more, on top of the pipeline fees you could also claim partnership income from this ‘plan’s’ processing plants, fuel terminals, fuel transport barges, and tow boats. Not to mention even more income from their billions of cubic feet in natural gas storage.

“There’s still more.

“Two of this first ’10-86 plan’s’ newest pipelines tap the rich Barnett Shale fields in Texas.

“Another two of your partnership pipes run from the Piceance Basin in Colorado.

“A third runs crude oil from the Gulf of Mexico.

“And you could see the partnership add another 837 miles of gas and oil pipelines over the next two years….

“… cash payouts have gone up 36 times since 1998….

“… they’ve got $1.8 billion cash on hand.”

And apparently this one has an extra perk for unitholders:

“One special perk of this first ’10-86 plan’ is that it lets you lock in an instant 5% gain with your very first payout. And you can keep getting that gain with future checks.”

Thinkolator results? This one is Enterprise Product Partners (EPD), one of the largest MLPs and a dominant one in many ways — they do have a huge pipeline network mostly feeding from Texas and Louisiana to the Midwest and Northeast, but they also own huge storage assets, lots of processing capacity for natural gas liquids (NGLs), and other assets as teased, including barges and tow boats and the like. They’re one of the larger MLPs with a market cap of about $33 billion, and their diversified portfolio and consistently aggressive growth posture have made them an investor favorite for a while.

And the 5% discount? EPD is one of the fairly rare companies that does actually allow you to reinvest your dividends at a discount to the market price if you enroll in their Dividend Reinvestment Plan (DRIP) — and if you intend to hold the shares for a long time and let your investment compound, that could make a huge difference over time (some brokers will enroll you in these plans, others won’t so some folks may have to enroll directly with the company and hold the shares with the transfer agent — you can see the info here).

The current yield is right at 6%, which is on the low side for the group but not dramatically so, especially considering their huge size and diversification (and there are some other growth-focused big MLPs that are even a bit lower, like OneOK — OKS — at about 5%). The closest competitor to EPD is probably the slightly smaller Kinder Morgan Partners (KMP), and each of them makes up about 10% of the ETF for Master Limited Partnerhips, the Alerian MLP ETF (AMLP).

Some more? But of course!

10-86 ‘Payback’ Plan” #2 The Income Hedge: Big Cash Payouts Even In Down Markets

“Ten years ago, one of the world’s biggest gas and oil companies made a huge mistake. And you can use that mistake to line up a second stream of ’10-86′ income.

“What was the mistake?

“The giant oil company I’m talking about was looking to drum up cash. So they sold off their own private stake in another giant pipeline and refinery network.

“You can guess what happened next.

“A group of pipeline partners quickly seized the reins… and they’ve been piling up cash ever since. They’ve also been doling it out to any partners who signed for their ‘plan.’

“Since 2002, you could have watched the gain on the shares of this partnership skyrocket by 337%….

“… 5,400 more miles of crude oil pipeline that run through Texas, Oklahoma, and the Gulf coast….

“… 42 fuel processing terminals and a storage network for over 24 million barrels of crude.”

Into the Thinkolator go the clues, and out the other end: Sunoco Logistics (SXL)

SXL is significantly smaller than EPD, and younger — it was formed just about 10 years ago to hold Sunoco pipeline, distribution and storage assets in an MLP form, and the unit price has more than tripled since then so certainly investors have enjoyed that run.

I don’t know a lot about SXL, but they did just get put on “negative” credit watch by S&P a few weeks ago because Sunoco, which still owns about a third of SXL and operates as their General Partner, has said that they’re going to get out of the refining business … so I guess the argument is that this might hurt SXL’s volumes, since they transport a lot of refined products and crude oil for their partner and Sunoco has effective control of the MLP’s operations. I don’t know much more about it than that, but SXL has certainly been a good grower to this point and is probably priced by MLP investors to expect pretty good distribution growth with a below-average current yield of 5.5%.


“The third ’10-86 plan’ I want to show you logs in over the last 15 years with a stunning average annual gain of 27%.

“With those kinds of annual returns, you could grow $10,000 per year into over $1.57 million in just 15 years. Of course bigger accounts grow even faster.

“And just like the other two ’10-86 plans’ I showed you, this third one dominates.

“As a partner, you would own a share of the income on 24,000 miles of natural gas pipelines… another 8000 miles of gas, diesel, and jet fuel pipelines… and 2000 more miles of pipelines for shipping crude oil.

“That’s 37,000 miles of cash-generating pipelines altogether.

“Even Forbes calls this third ‘plan’ a…

“‘Steady business’ with a ‘juicy dividend.’

“Plus, you could collect on this ‘plan’s’ 400 billion cubic feet of natural gas storage…. pipelines carrying gas from Ohio to Colorado… and another that feeds gas into Chicago.

“In fact, you’ll be part owner of the largest refined fuel transportation network in America… with over two million barrels of gasoline, jet fuel, diesel, and natural gas liquids moving through the pipelines you could own every single day.”

That one, Thinkolator sez, is Kinder Morgan Energy Partners (KMP), which I mentioned above — the second biggest of the big pipeline guys, after EPD, with a market cap of about $22 billion.

And if you want that “juicy dividend” article from Forbes, it’s right here.

Hard to argue with EPD and KMP as the two biggest and most diversified MLPs, though if you’re not into the K-1 forms or the company specific research you’ll get roughly the same yield and probably similar returns from the much more diversified MLP ETF (AMLP, that is) — of course, you don’t get the reinvestment discount that you would from EPD, and you don’t get the tax benefit of sheltering most of your distribution income until you sell the shares.

I know there are a lot of ardent MLP fans (and a few foes) out there in Gumshoedom, so if you’ve got some wisdom to share on the sector or on these picks from Jim Nelson, well, lay it on us with a comment below.

And if you’d like to know how Lifetime Income Report subscribers like the newsletter, you can see reviews we’ve collected in the column to the right or by clicking here to read subscriber reviews or submit your own opinion.


How do you make sense of it all?

I check my net worth and my portfolio (combined from several different brokerage accounts) using Personal Capital at least once a week, it's free and brilliantly organized.
Personal Capital has great tools for tracking spending (they can cut your spending by 15%), but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.

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112 Responses to “Gaspump Revenge” thanks to Reagan, using “10-86 Payback Plans”

  1. Instead of KMP – Don’t over look KMR to hold in taxable accounts. Same divy as KMP except paid in shares!


      • Those are the only two I know of as well that operate in the Mid Stream sector, but there is also (LNCO), the management company of Linn Energy (LINE) which is a top 15 independent oil and nat gas E & P. Dividend is 9.80% at today’s price of $31.20. Cash dividends and no-K-1s. Much has been written about the companies recent purchasse and pending merger with Berry Petroleum. A company to give strong consideration to.


      • Be careful about putting investments that generate K-1′s in your IRA. The IRA CAN NOT have business income in it. It will have to pay tax if it exceeds $1,000. Oil and Gas k-1′s can generate line 1 or business income. Rental inc ome, interest and dividends are allowed income. Business income is not.


    • What is being discussed is MLPs which are traded on the stock exchanges just like any stock or bond. The advantages are nice yields form 5 to 8%. There can be price appreciation, This year about 50%. There are no taxes until you sell. The dividends you receive reduce your cost basis. They are subject to long term capital gains. You will K1s which are a pain in the butt to fill out. I hire a tax professional to do my taxes as I also have rental property. It only costs me $300 a year and she usually saves me more than that. For all but the very rich yyou you can keep them in an IRA. You can also keep them in a taxable account. If they are in an iRA you don’t have to do the K1′s. IRA’s are taxed at your nominal rate regardless of what securities you hold. Another advantage of MLPS is they are a hedge on inflation. If prices go up they will raise their prices.


  2. Hi Travis,
    Where would Williams Partners (WPZ) fall in line as far as size and profitability of a pipeline company compared to Enterprise (EPD) ?


    • I don’t know it well, but Williams is quite large — smaller than Kinder Morgan and EPD but bigger than any other one I can think of offhand, with a market cap around $15 billion. From a quick glance it looks pretty reasonably diversified (Rockies, Marcellus, Gulf of Mexico), and has plenty of cash flow (and recently even actual earnings) for the distribution, which is slightly lower than average as a percentage.


  3. Does the value of MLP shares fluctuate over time only as a result of market forces, or is the share value reduced by the “return of capital?” Would it be fair to say that owning MLPs outside of an ETF is more appropriate for those in higher tax brackets?


    • MLPs are not necessarily “depleting resources” in the way that some trusts can be (though there are producing partnerships like Linn Energy, Legacy Resources, etc. that should theoretically lose value as their assets are produced — even for them it’s not so simple, since unlike US trusts they can find or buy new assets). They are from an accounting perspective, since the pipelines should become less valuable as they depreciate, but it”s not so clear cut and I don’t know that there’s a strong correlation with the share price.

      More important, generally, is whether a pipeline company has assets in the right area (ie, is the collection system they have still in heavy use, is production in that field climbing, or is that area seeing declining energy production? Are the big gas pipelines from the Gulf Coast to the Northeast going to see less volume as Marcellus Shale production increases to meet local demand? Things like that), and whether they continue to expand and/or have regulators who allow for decent profit margins or pipelines with good safety records. For the most part, these trade as yield instruments in my experience — so as distributions go up unit prices (share prices) go up, but if (for example) CD rates went to 6% tomorrow most MLP unit prices would collapse, just like most REITs and most bonds, investors who want high income go where the yields are best relative to safety of principal.

      And I can’t answer your tax question, though the main benefit of the MLP structure as it pertains to taxes is the ability to defer most of the tax bill until you sell — sort of like a traditional IRA. The trade association for publicly traded partnerships has a good page up about it (though they have a bias, of course) here: http://naptp.org/Navigation/PTP101/PTP101_Main.htm


      • If the unit prices collapsed in the face of an interest rate adjustment, would it be correct to assume the dividend yield would still go on, perhaps at a nominally higher rate because of the reduced unit price, and the price upon future sale could actually generate a taxable loss, even though the lower priced shares had continued to generate income at a decent yield?


        • Not sure I understand the question, but return of capital (which is what a lot of MLP’s pay out to boost the yield) lowers the cost basis in the shares, so that would mean that your tax liability increases upon future sale unless the share price falls further or faster than your cost basis drops. I’m not a tax expert, that’s just the basic mechanics of the system.


  4. I think that Terra Nitreogen is also a “10-86″ company. It was bought out be C F Industrioes. It is still listed on the NY stock exchang. Does that it will no longer be a MLS?
    This article answered a lot of questions for me. Thanks.


  5. if an mlp is purchashed in a retirement account , the ditribution could be subject to unrelated business income tax by the irs.


  6. I love EPD at these prices. EPD also acquired a company called TPP, another pipeline. I truly believe that EPDis a great company and will be even greater in ten years, while paying out handsome dividends.


  7. I spoke to the Fidelity representative yesterday about these and they trade most of the ones we talked about.


  8. Can anyone in the world of any nationality buy into a 10-86 company (or is it a case of buying into a diversified holding of several of these companies?).


  9. Contrary to all info being taught everywhere, I have found it best to buy MLPs in a tax-deferred account (IRA good, Roth IRA even better – tax-FREE income forever.) I’m not sure how it would affect 401K, however.

    The complexity of small investors dealing with K-1s is just too much in a taxable account. Thankfully, it takes $1,000 of UBTI (Unrelated Business Taxable Income) to trigger any problems in an IRA. It would probably take a $3 million investment in MLPs to get anywhere near that level of UBTI (since most distributions are return of capital, depreciation, etc.)

    If you already have partnership income from running a business and already have to deal with K-1′s, then by all means get MLPs in a taxable account and participate in the income-deferral advantages. You already have the accountants working for you to handle the complexity. But for a small-time investor I say do it in an IRA and save the hassles. I always used TurboTax to do my own taxes, but with K-1′s I found it necessary to pay for tax preparation. Now that MLPs are only in my IRAs, I am back to doing my own taxes and saving $400/year. (On second thought, maybe its worth $400 to avoid that stress anyway.) ;-)
    @Nancy, MLPs are just traded on exchanges through a regular broker or online account, like any other regular stock (EPD, KMP, LINE, MMP, etc)


  10. I have an IRA account but this 10-86 is new to me I need assistance from someone who is
    fluent in 10-86 investing ie how do I get started?


      • Travis, don’t you mean “some people prefer to hold them in non-taxable accounts” (such as Roth IRA) due to the recordkeeping hassles?.

        Thanks for this website……best in the world of it’s kind.


    • it sound like a good idea but how do i get involved i don’t have a lot of upfront cash right now, so how do i invest and who can i contact to get in.


    • 10-86 is just some advertising hype name. What you will be buying is the companies discussed as stocks in your portfolio. The easiest is KMR and EEQ if you want a partnership interest. No special requirements, no tax until you sell. Just move your IRA to a full service broker, go online and buy some shares on the next days open.


  11. Using the example of the past with a $10,000 investment growing to over 1.5 mil or so., is that a single one time investment and reinvesting all payouts? or do I need to continue to invest yearly?

    also, is it sensible to buy an MLP online through a discount broker service? or do I need a desk jockey to handle the paperwork with me?


    • No guarantee on the return, but if it is a company like KMR that will automatically reinvest and defer your taxes it is a one time, lump sum speculation. Yes you can use some discount broker, but for the slight about it costs a full service broker will be much better.


    • No guarantee on the return, but if it is a company like KMR that will automatically reinvest and defer your taxes it is a one time, lump sum speculation without paperwork.

      Yes you can use some discount brokers, but for the slight amount it costs a full service broker will be much better. Avoid discount brokers that will not reinvest partial shares.


  12. Travis, as far as I know, there are virtually no tax record keeping requirements for stocks within a tax-deferred retirement account like an IRA. I have preciously only paid income tax upon taking a cash distribution out of the account. So, Travis, why would I need to do specific record-keeping for a 10-86 held in, or eventually sold out of, such an account?


    • There are virtually no tax record keeping requirements for KMR and EEQ with, or without a tax-deferred retirement plan. Taxes are deferred until you sell as part of the deal.


  13. I am a long time happy MLP investor. The K1 reporting seems daunting at first, but if you stick with the better knwon MLP’s the form they send you with the accompanying explanation can be plugged straight into turbo-tax business. The Drip advantaged price is something I did not know about, thanks for the tip. I would avoid MLPs in tax deferred IRAs becuase of the murky IRS issues which have potential horrible consequences. You can use the Alerian fund in tax deffered account and also the KMR version of shares instead of KMP, as mentioned above. One issue with taxes, is you have to do a tax return in every state in which the parntnership does business, and canada if the pipeline runs accross the border! Luckily unless you have very,very large investments the small amounts of tax due in the different states except the one you live in, can be ignored. I did once fill in a Canadian tax return and owed about $50. I got a very nice letter back thanking me! I did not bother the next year!


      • Dennis,
        You can use the non MLP versions when they are offered in any tax advantaged account that has brokerage privaleges without problems. So Roth IRA,IRA,rollover IRA,Rollover Roth,Rollover 401k,Self 401k etc, but you are limited in that the number of MLPs which are structured to allow use in IRAs is limited. Ones that I have used are KMR, which is a version of KMP which takes the unit distributions as new shares. KMI recently which is the general partner, parent of both KMR/KMP and has some rather interesting prospects currently, with purchase of another pipeline company that will eventually be structured into KMR. And Alerian Fund which is a basket of MLPs. Search the web to understand what you are getting into if you use KMI.


    • Hi Tim,I am thinking about investing in these Cushing 30 MLP index holdings. I thought if I purchase them separately(30 in all) I would save a lot compared to doing the ETN(MLPN) they offer which charges .85% oper. cost and has no tax advantages for deferred income. My question to you is if I invest approx. $450k, do you think I would have a lot of state tax returns to file? I use turbo tax each yr. too and was hoping they would be able to handle the 30 that are in this index, what do you think? Thanks in advance, Rog S.


  14. Does anyone know about Boardwalk Partners (BWP)?
    Seems to pay a dividend from 7 to 8.21%, but I don’t know about the tax filing requirements and I would be buying it in a rollover IRA.
    Thank you


  15. Travis,
    Most people here dont seem to know how to invest in one of these companies, it’s fairly simple, you just buy shares of them and it’s publicly traded.

    The question is, should you? Im looking at the price in the past 3 years has gone up and up and up…. at $45 a share for EPD, is this a good tie to buy when it’s apparently hitting it’s peak?


  16. TYY is also bunch of MLP’s rolled into one. As far as i know they do the K-1 crap themselves and the dividend in comparable to these other MLP’s.


  17. Would MLP’s be advisable to someone with little retirement and absolutely 0 taxable income? All income is disability from VA and SS.


    • Quarterly, They can be reinvested, if you go with KMR or EEQ they will be tax deferred similar to a traditional IRA.


  18. is there something special about a 10-86 plan or is this just inherent when you own any of these MLPs? I own some of these, is there something else I should do aside from drip?




  20. So i the long run you are saying that this isa good investment to add to a portfolio? right or wrong…………….


  21. Very informative article, THANK YOU for posting! I actually got thru 5 minutes of Nelson’s video before finding your article at the top of my google search.


    • Yes but it would be better to diversify. With 5,000 you can easily own three securities with KMR or EEQ being one.


  22. BUY AMERICAN..These are the companies who use only American Oil…0 from the Mid East.
    .** Sunoco…………………….0 barrels
    ** Conoco………………………0 barrels
    ** Sinclair…………………….0 barrels
    ** BP/Phillips………………..0 barrels
    ** Hess………………………..0 barrels
    ** ARC0…………………………0 barrels
    ** Maverick…………………..0 barrels
    ** Flying J…………………….0 barrels
    ** Valero………………………. 0 barrels CAMurphy Oil USA **………….0 barrels
    *Sold at Wal-Mart < , gas is from South Arkansas and fully USA owned and produced.
    *Not only that but they give scholarships to all children in their town who finish high school and are legal US citizens


  23. Considering a 10-86 Plan Investment? Complex and a chore to manage plus their performance is worse than Facebook. Look guys, ever hear that old saying “If it sounds too good to be true…”? If 10-86′s are such a good deal then why does it take that guy in the video soooo long to make his pitch? That’s right, because it’s a scam. Just another greasy salesman trying to sell you timeshares in a condo project due to be completed in 2015 that right now is Florida swampland that has not geen got the permits yet. Walk away people. Cheers


    • The reason the guy in the video Jim Nelson takes so long to make his pitch is for you to buy his other unwanted stuff at the end, sign up for $49 and get all his other junk reports. Then he also tries to sell you his 2 year reports for $89 insisting on a percentage discount if you will buy it for 2 years. It is a quick way to make you part your money through credit card.


    • You can get 15 years on Kinder Morgans web site, but I don’t think they were around twenty years ago. Besides the world changes to rapidly for 20 year old information to be useful. The real deal is we are about to switch from an energy importing nation to an energy exporter. People in now can benefit from that change. Those inflows of wealth have not started yet.


  24. There seems to be a lot of confusion about buying “10.86 Plans.” The term 10-86 may refer to some section in the IRS code, but they can be acquired the same way you acquire stock in AT&T or any other company. I use an online broker. (E-Trade) All I have to do is go into my account and place a buy order, using the symbol for the the stock or MLP (AKA 10.86 plan).
    Some MLP symbols are;
    EPD, DPM, ETP. You can go to Yahoo finance and type in these symbols and get the current price, yield % and a lot of other information. Some MLPs are not pipelines, such as Line Energy, symbol LINN.
    Some other high-yielding investments that do not issue K-1s are Royalty Trusts, Business Development companies, and Real Estate Investment Trusts. I own some of these as well as MLPs in my IRA. I own LINN in a non-IRA account.


  25. how do you invest in the pipeline company the 10-86 program that has to pay back 80
    or90 percent of the profit as per president Ronnie


  26. For those who invest in MLPs how do the income distributions reach the investor? Does the income show up as a deposit in a brokerage account? Or by a check?


  27. am interested in 10-86, would like to know how to progress in this venture, please help me get in volved in 10-86


  28. I have just read thru all the comments and it is clear that many people have no idea what is going on here.

    What is a 10-86 plan? It is a made up marketing ploy to get you to buy a newsletter.
    10-86 = MLP or Master Limited Partnership, which is what the article above is all about. There is NO special FORM to apply with, you just BUY them (the MLP) thru a broker as with any other stock.


  29. Travis and others,
    Thanks for the info on “10-86 plans”.
    Can a MLP be used in a 1031 real estate exchange?
    I have a $390,000 investment property with $190,000 mortgage. Expected capital gains w/o a 1031 exchange would be $10,000 plus the recapture of depreciation would be another $20,000 of taxes due next a April. (This is non-IRA.)
    Is an MLP an option to defer these taxes and, if so, how within the 45 and 180 day timing?
    Thanks, Don D


    • Travis,

      Are these 3 stocks still a good investment today, Sept. 21, 2013. I would like to purchase them and let the dividends just roll over to buy more shares. What is your recommendation?




  30. If I put $10,000.00 into the 1, can it grow to over $1 Million in 15 years? Or should I put $5K in one and $5K in another? If so, which 2 would you pick?

    Thanks again,



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