An master limited partnership is a publicly traded partnership — a limited partnership whose units trade on a public exchange like stock, but which is taxed as a pass-through entity rather than as a corporation. IRC §7704 draws the line: a publicly traded partnership normally gets taxed as a C-corp unless at least 90% of its gross income comes from qualifying sources (chiefly natural-resource extraction, transport, and processing income). That carve-out is why the MLP universe is dominated by midstream energy — pipelines, terminals, storage — and why MLPs in other sectors are rare.
The investor owns units rather than shares and receives a Schedule K-1 each year detailing the partnership’s allocated income, deductions, and credits. That K-1 treatment is the structural feature that makes MLPs both attractive (no entity-level tax, large return-of-capital distributions that defer recognition) and operationally burdensome (the K-1 arrives late, can create UBTI in IRAs, and may trigger filing requirements in every state where the partnership operates). The full investor-side treatment — K-1 mechanics, the basis-strip arbitrage at death, the MLP-ETF and MLP-ETN wrappers that simplify the tax filing at a real yield cost — is in section “Master Limited Partnerships (MLPs)”.