By Sean Pattap

Sean Pattap is a senior director in Fitch Ratings’ U.S. REITs group.

Sean Pattap
Sean Pattap

The popularity of high-yielding tax-advantaged securities, such as U.S. real estate investment trusts (REITs) and master limited partnerships (MLPs), has soared over the last several years given the ongoing combination of central bank easing and rock bottom interest rates. While REITs and MLPs are corporate bond issuers with many similarities, including liquidity needs and tax considerations, there are select key differences between the two.

No. 1 — Tax Implications

Tax Efficiencies

REITs and MLPs have greater tax efficiencies than corporations. A REIT is organized as a corporation or business trust. By electing REIT tax status, the REIT is exempt from paying tax on the portion of income paid as dividends to shareholders. An MLP is structured as a partnership, which also allows greater tax efficiency, since partnership earnings are not....

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