what is a unitholder 
a unitholder is an investor who owns one or more units in an investment trust or master limited partnership mlp a unit is equivalent to a share or piece of interest unitholders are afforded specific rights that are outlined in the trust declaration which governs the trust s actions the most common type of unit trust is an investment vehicle that pools funds from investors to purchase a portfolio of assets these unit trusts invest in many asset classes of stocks large cap small cap domestic international etc bonds investment grade high yield emerging market tax free etc real estate and other securities understanding unitholdersthere is a whole spectrum of risk reward choices for investors in these unit trusts the unitholder gains exposure to a pool of securities and is free to trade units at any time though a unit trust tends to be less liquid than say an exchange traded fund etf and the price of the traded unit may not be equivalent to net asset value nav of the unit trust per share unitholders may also have an interest in a master limited partnership mlp an investment vehicle that offers significant tax advantages to both general and limited partners 1 most mlps are in the energy sector 2 for example pipeline companies prefer the mlp structure to offer preferential tax treatment of cash flows to partners and unitholders what primarily attracts unitholders is the potential for high income yields of mlps 3one difference between unitholders and shareholders is that while unitholders may have some voting rights those rights are often quite a bit more limited than those of corporate shareholders unitholder taxationfor unit trusts unitholders pay income taxes on interest dividends and capital gains distributed to them if the units are held in a taxable account the unit trusts send all unitholders irs form 1099 typically 1099 int or 1099 div 45in the case of master limited partnerships mlps each unitholder s proportion of income gains deductions losses and credits is reported on a schedule k 1 67 if the net amount is positive the unitholder pays tax on a pass through basis whether or not a cash distribution was actually received if there is a net loss the amount can be carried forward and used against future income but only from the same mlp 86the tax cuts and jobs act passed in 2017 introduced a new tax deduction for pass through businesses including unit investment trusts the qualified business income deduction or 199a deduction allows non corporate taxpayers to deduct up to 20 of the qualified business income from each pass through business they own 9example of a unitholderlet s say an investor is interested in being a unitholder in a real estate investment trust reit the investor does their due diligence and decides to purchase shares in prologis inc pld the largest real estate company in the world because they like the assets in the portfolio and its potential for growth in the current market environment 10 all income that the unitholder receives will be taxed as pass through income 6