Linn Energy Looks to Ease Tax Hit on Investors [WSJ]
It sounds like investors in energy master limited partnerships should be worried:
A wave of expected bankruptcy filings and debt restructurings could trigger taxes for investors at a number of energy firms, a doubly unpleasant outcome that has companies searching for a fix.
Linn Energy LLC, a Houston-based oil-and-gas producer, is exploring a change to its corporate structure that could shield investors from a tax hit triggered by a likely debt restructuring, according to people familiar with the matter. Distressed peers are watching closely, hoping Linn can provide a blueprint to follow as low oil prices continue to spread pain through their ranks.
When oil prices were high, everything was great for MLP unit holders. They received distributions directly without income being taxed at the corporate level. But now that oil prices have cratered, things could get bad:
Investors with potentially worthless shares—or units, as they are known—may nonetheless owe taxes on debt that is forgiven in a bankruptcy or an out-of-court restructuring.
That is because MLPs pay no corporate taxes and instead pass certain tax burdens, along with a share of their income, to investors. Debt forgiven in a restructuring counts as noncash income, or “cancellation of debt income,” which creates a tax liability for investors without an associated cash distribution.
Fitch estimates an 11% default rate for US high-yield energy bonds by the end of this year. GAH.
Firms Plead Guilty to Helping U.S. Taxpayers Hide More Than $130 Million [WSJ]
It sounds like holders of offshore bank accounts in the Caymans should worry, too:
The two firms, Cayman National Securities Ltd. and Cayman National Trust Co. Ltd., are both affiliates of Cayman National Corp., which provided investment brokerage and trust management services to individual and entities, according to the Justice Department.
The two firms agreed to pay more than $6 million in fines and will provide U.S. authorities with the files of up to 95% of their U.S. clients who sought to hide assets or income from the Internal Revenue Service.
It's interesting to note that the $130 million being hidden only earned the account holders $3.4 million from 2001 to 2011. That is quite small compared to the funds stashed in Switzerland. Nevertheless, "[T]his is the end of Cayman bank secrecy for U.S. taxpayers," says criminal tax lawyer Scott Michel. I suspect another country will pick up the coveted "rich people hide their money here" market soon enough.
Gen X Retirement
And Gen Xers are already worried:
Generation X’s skepticism about retirement may be warranted, according to a report from the Insured Retirement Institute (IRI). Overall, more than one-third of this demographic has nothing saved for retirement. Other research calls this generation by far the most stressed.
While retirement may still be years away, only 8% of Gen Xers have enough saved to support themselves in retirement. Even among the oldest Gen Xers, those aged 44 to 53, only 11% have adequate savings.
The article suggests that "One problem could be that most Gen Xers—eight in 10—are DIY investors who manage their money without any professional guidance," which is funny since professional investment advice doesn't really work! This isn't my investment advice to you or anyone else, btw, but really! Gen Xers may just think that they need a guy or gal to tell them what to do with their money so they can retire some day, but all they need to do is start stuffing money in some low-fee index funds that track stock and bond markets and everything will probably be fine.
In other news: