Can a company stock, held in an IRA, that reports income on a 1099 generate UBTI (Unrelated Business Taxable Income)? Or am I safe holding them?

[knechod]

PAGP and NEP are two examples of limited partnerships that report income on a 1099.  I am getting conflicting information about whether or not I could get taxed on UBTI in my Roth IRA.

[tagteam]

It is applicable to Roth IRAs ($1,000 or more), but the custodian will file the 900-T.

@dmertz ?

[knechod]

Thanks for looking at this, but I am not convinced that the custodian is handling the situation correctly.  I am not even sure that there is enough detail on the 1099 to even calculate UBTI.  Can it be done if the company does not issue a K-1?

[dmertz · Accepted solution]

Since these entities do not issue a Schedules K-1, it appears that these are not a pass-through entities.  It's my guess that these entities are themselves responsible for paying the UBIT on any UBTI generated by the shares of the partnership(s) that they own and the UBIT that they have to pay (an expense) is reflected in the share value of these entities.

[knechod]

@dmertz , If I am understanding correctly, you are saying that a business that reports via 1099 would pay the taxes for any tax liabilities from partnerships they own.  I am not sure I have that right.

NEE is NextEra Energy, and NEP (NextEra Energy Partners) is an LP subsidiary that reports with a 1099.  In your answer, would you be talking about NEE's responsibility for NEP shares they owned, or are you saying that NEE would cover the tax liability for all of NEP's unrelated business taxes?

I am trying to figure out if NEP's 1099 reporting of their LP shields me from UBTI taxes.

[dmertz · Accepted solution]

I don't see how you would be responsible for any UBTI if you receive no Schedule K-1.