Are Freedom Checks free from doubt?

Freedom Checks have been widely promoted as a way to supplement your income. As a culture, we have come to believe that anything widely promoted must be a scam, why would anybody give away something of value? Is it a way to generate income? Or is it just another attempt by somebody to take money from me? The answer is yes.

“Freedom Checks” is a sort of branded version of a legitimate financial vehicle. They refer to payouts from a Master limited Partnership, or MLP. The statute referred to is 26 U.S. Code Subtitle F, and is said to allow tax free operations of the MLP, so long as they generate 90% their income from oil and gas operations that involve storage, production, processing, or transporting the commodity, and, payout 90% of their income to shareholders on a monthly or quarterly basis. I’m not a lawyer, and that interpretation comes from researching other people’s opinions, so your mileage may vary. Learn more about Freedom Checks at Crunchbase.

Here’s how it works. You buy units of a Master Limited Partnership, which trade publicly. Firms settle on the MLP structure because it avoids taxes, the payout is taxed once, at the shareholder level, instead of twice as is the case for dividends to stockholders. Also, distributions, “Freedom Checks” which exceed partnership income is treated as capital gains, not income, which has a favorable tax treatment, and the isn’t taxed until the unitholder sells. So far, so good.

The folks that made money in Alaska during the gold rush were not, generally, the ones mining for gold. They were the folks enabling the miners, selling supplies, administering claims, providing services. And so it is with Freedom Checks. You can absolutely probably make money buying units of MLPs. If you buy units in the right MLP at the right price. You can absolutely definitely make money by selling advice to folks who are interested in buying units in MLPs.

The guy behind the infomercials that promote Freedom Checks is Matt Badiali. He sells subscriptions to his investment news letter, where tell advises on which of the approximately one percent of MLPs in which he recommends investment. Return on investment in the right MLP at the right price could return 5 times that which you would make on a CD and receive the favorable tax treatment previously described. Or not. But you may be able to deduct the cost of the newsletter from your income. As I said, your mileage may vary.



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