Exchange traded notes, on the other hand, removes the corporate-level taxation problem and better reflects the full performance of the underlying index. The ETN, though, is an unsecured note issued by an underwriting bank and is taxed as ordinary income. [The 411 on MLP ETFs & ETNs]

First trust recently came out with the actively managed First Trust North American Energy Infrastructure Fund (NYSEArca: EMLP), the first RIC-compliant MLP product that doesn’t dilute the tax benefits of holding individual MLPs. However, by limiting MLP holdings to 25%, the ETF includes other energy infrastructure firms with similar characteristics to MLPs.

Additionally, the newer Global X MLP & Energy Infrastructure ETF (NYSEArca: MLPX) also limits holdings of MLPs and includes a basket of energy infrastructure stocks to eliminate the corporate-level taxation associated with C-Corporation ETFs. [Global X’s New MLP ETF Attempts to Avoid Tax Bite]

For more information on master limited partnerships, visit our MLPs category.

Max Chen contributed to this article.