Who Should Invest In Oil and Gas UITs?
Investors who are seeking more direct, tax-advantaged exposure to oil and gas investments should consider oil and gas UITs, as the UITs can pass through deductible operational expenses and investment income that is eligible for the depletion allowance. Energy-focused mutual funds may only buy equity interests in various oil, gas, and other energy companies, but seldom offer direct participation of any kind. Energy mutual funds cannot offer pass-through treatment, and usually can only post fully taxable dividends and capital gains. (For more reading on the tax implications of investing, check out Common Tax Questions Answered.) Furthermore, oil and gas UITs will not post taxable capital gains of any kind until the trust matures, unlike mutual funds that pass through capital gains annually. Aggressive investors seeking larger profits in the energy sector may also benefit from the more direct arrangement of oil and gas UITs as opposed to energy mutual funds. Pros and Cons One of the main