Publicly Traded Partnerships – Trading 212

On the first of January 2023, the IRS’ new internal revenue code, section 1446 (f) will come into effect and will affect Trading 212 users who invest into Publicly Traded Partnerships (PTP).

Publicly Traded Partnerships on Trading 212 will be impacted by the change by the IRS will mean that non-US tax residents, after December the 30th, will have a withholding tax of 10% applied.

With this news Trading 212 has suggested that you have until the market close on December 29th to close or modify your positions. On the 30th of December Trading 212 will instruct a market order to liquidate any remaining holdings, to make sure that the 10% withholding tax is not applied.

What does the IRS change mean?

If a non-US tax resident sells a position worth $10,000 there will be a $1,000 withholding tax, regardless if there is a profit or not made by the investor.

As a result, the investor will receive only $9,000 from the sale of their $10,000 position.

Going forward Trading 212 will not offer PTPs to investors on the platform and will be forced to sell positions after the 30th of December.

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What is a Publicly traded Partnership?

A Publicly Traded Partnership (PTP) is similar to Master Limited Partnership (MLP) but there are a couple of differences.

  1. Tax treatment
  2. Shareholder structure

For a company to qualify for the PTP status, 90% of the partnerships income must come from qualifying sources which is outlined in the Internal Revenue Code, title 26, sub F, chapter 79.

Generally the qualifying income sources include interest, dividends, property rent and any gains from sales from real property.

As a partnership, PTPs do not pay tax and are able to pass on more of their income to investors compared to corporations. Distributions to partners are treated as a return of capital rather than income and there for reduces the partners basis with each distribution.

Where stocks traditionally return cash to investors in the form of dividends, PTPs return cash as return of capital. Partners in a PTP are taxed on their share of the partnerships income and deductions. The income is reported on a schedule K-1 (form 1065), partner’s share of income, deductions, credits, etc.

What is Trading 212’s position to the change?

Due to their tax obligations of holding and maintaining PTPs they will discontinue offering Publicly Traded Partnerships.

Trading 212s position on the recent change can be found here – Publicly Traded Partnerships (PTP) Update – December 2022

Which stocks are affected?

Instrument name

Brookfield Infrastructure Partners

Brookfield Renewable Partners

Lazard

Alliance Resource Partners

AllianceBernstein

Black Stone Minerals

CVR Partners

DCP Midstream

Energy Transfer

Invesco DB US Dollar Index Bullish Fund

NGL Energy Partners

Plains All American Pipeline

ProShares Ultra VIX Short-Term Futures

ProShares Ultra Bloomberg Natural Gas

United States Oil Fund

United States Natural Gas Fund LP

ProShares Short VIX Short-Term Futures

Holly Energy Partners

MPLX

Enterprise Products Partners

Cedar Fair

Magellan Midstream Partners

Western Midstream Partners

Suburban Propane Partners

NuStar Energy

Cheniere Energy Partners

Icahn Enterprises

RTW Venture Fund

Gyrodyne

1847 Holdings

Global Indemnity

USA Compression Partners

USD Partners

Global Partners

Evolve Transition Infrastructure

Sunoco

Westlake Chemical Partners

Crestwood Equity Partners

Belpointe Prep

Calumet Specialty Products Partners

Delek Logistics Partners

Summit Midstream Partners

Dorchester Minerals

Ticker symbol

BIP

BEP

LAZ

ARLP

AB

BSM

UAN

DCP

ET

UUP

NGL

PAA

UVXY

BOIL

USO

UNG

SVXY

HEP

MPLX

EPD

FUN

MMP

WES

SPH

NS

CQP

IEP

RTW

GYRO

EFSH

GBLI

USAC

USDP

GLP

SNMP

SUN

WLKP

CEQP

OZ

CLMT

DKL

SMLP

DMLP

What can you do if you own a PTP on Trading 212?

Technically if you hold any of the for mentioned PTPs in your portfolio on Trading 212, you don’t have to do anything as on the 30th of December any positions will be sold before the changes happen.

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Affected PTP stocks - Trading 212

Saving the sale from the future imposed 10% withholding tax on sales.

 

You may wish to sell any positions before the deadline to lock in any gains or can ride out till the deadline.

If you are unsure if your investment will be affected you can look through the list above to see if you may be affected by this change. Alternatively if you may see an information notice on the stock mentioning that the instrument will discontinue following 29th December 2022.

 

These changes do not just affect Trading 212 but also other brokers such as Freetrade as these new tax obligations create much more paperwork for brokerages to handle and overall is easier and more efficient to stop offering such securities.

If you are looking for a brokerage then check out our Trading 212 review, to make sure you are using the best brokerage for you.

Trading212 Review

 

 

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