MIPS


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Monthly Income Preferred Securities

Preferred stock representing a portion of ownership in a limited partnership. The limited partnership is a subsidiary of another company and exists only for the purpose of issuing the MIPS. The proceeds from MIPS are lent to the partnership's parent company. These securities thus combine aspects of stocks and bonds; they mature on a monthly basis and usually have a par value of $25. Returns on MIPS come out of the partnership's pretax earnings.

MIPS

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The conclusion will come as a surprise to those practitioners who believed that, if the Service were to disregard the LLC in a MIPS transaction, a corporation would not be entitled to an interest deduction.