Taxation of Pref Equity

[Mike Shah]

I've been looking at a few pref equity deals and it seems like they are all promising different taxation. 

Some have told me that they get taxed at lower capital gains tax rates, while others have said you get a 1099-DIV which would get taxed at ordinary income tax rates. Any insight onto how pref equity is typically taxed if you're getting a 10-12% monthly coupon payment? 

[Stuart Udis]

If you are receiving monthly payments this does not sound like its tied to the sale of an asset and thus not LTCG income. Tax treatment has a big impact on the after tax rate of return which is how you should analyze any investment opportunity. I would recommend speaking with an accountant as most operating or partnership agreements contain language that shields the GP/Sponsor when it comes to any type of tax representations.