I admit it.

I hate K-1s.

For the uninitiated, K-1s are a tax form generated by a partnership to report income.

If you own Master Limited Partnerships, you get a K-1 instead of a 1099.

They can be a nightmare if you do your own taxes.

Pro Tip: If you own MLPs, do not do your own taxes.

Again, for those of you who have never owned them, Master Limited Partnerships are fantastic little dividend machines that allow you to own businesses that are formed as partnerships specifically for tax purposes.

I have owned many of them over the years, starting with cable TV partnerships in the 80s and 90s.

It seems like every time I stick a tax return in the mail or hit send to file, I would almost immediately get a corrected K-1, causing me to have to amend my return.

My accountants love K-1s.

I hate them.

However, I hate taxes even more, and owning oil and gas midstream MLPs allows me to earn fat yields and delay taxes.

MLPs are pass-through entities, which means they don’t pay corporate income tax. Instead, they “pass through” income, deductions, depreciation, and other tax goodies directly to you via a K-1. And while that sounds like a great deal—and it is—it comes with paperwork that could make your head spin like a slot machine.

The good news?

Most of what you get from an MLP isn’t actually taxable income. It’s classified as return of capital, thanks to heavy depreciation and amortization. That means you’re deferring taxes until you sell, when the IRS gets its cut as capital gains (and sometimes ordinary income via recapture).

You get paid now, and the tax man waits.

That’s the kind of relationship I can live with.

I know some people will avoid MLPs because they hate K-1s.

That’s unintelligent.

I love huge total returns a lot more than I hate K-1s.

Midstream MLPs (Energy Transfer, Plains All American) are the toll roads of the energy world. They transport oil and gas, and they make money whether oil is at $40 or $140.

Big, boring, and tax-efficient.

Most of the distribution is return of capital.

You are deferring taxes while collecting checks. If you’re a long-term, income-focused investor who doesn’t panic over paperwork (or has a good accountant), that’s a beautiful thing.

One of my favorite MLPs is Energy Transfer (Ticker: ET).

Energy Transfer is a large midstream MLP with a footprint across pipelines, terminals, natural gas liquids, and export facilities. This one is a cash cow.

It’s run by co-founder Kelcy Warren, a cowboy capitalist who may not win awards for governance but knows how to generate distributable cash flow like nobody’s business.

ET yields over 7%, covers the distribution by a mile, and has been deleveraging after some rocky years of debt-fueled expansion.

At today’s prices, you’re getting paid handsomely to wait while they keep buying back units and growing through bolt-on deals. It’s the kind of MLP you buy, hold, and use to fund your cigar and bourbon habit.

Just don’t hold these in an IRA unless you really know what you’re doing because UBTI (unrelated business taxable income) can turn your tax-sheltered account into a tax headache.

If you want to own high-yielding midstream assets in an IRA or other tax-deferred vehicle, consider owning closed-end funds that invest in MLPs.

If you love the income and tax deferral that MLPs offer but hate the K-1 paperwork more than a trip to the DMV, CEFs might be your ticket to the promised land.

When a closed-end fund buys MLPs, it does the dirty work for you. The fund itself files the K-1s with the IRS, handles all the accounting, and you, the shareholder, just get a 1099 at the end of the year. It’s like going from doing your own taxes in pen to using a concierge accountant—smooth, clean, and hassle-free.

What makes KYN particularly compelling today is the discount it trades at relative to its NAV, currently about 12%. That kind of pricing gives investors the chance to buy into high-quality infrastructure assets at a meaningful markdown.

In a market where many income plays have been bid up, this discount provides both a margin of safety and potential upside should the discount narrow over time. For those focused on long-term total return and patient capital, this is the kind of setup that quietly compounds in your favor.

KYN also continues to deliver reliable income. The fund recently declared a monthly distribution of $0.08 per share, which works out to an annual yield of just over 7% based on current market prices. Notably, approximately 60% of that payout is expected to be classified as return of capital, offering a tax-deferred stream of income that can enhance after-tax returns.