I received a Schedule K-1 for an investment in an IRA account. Should a Schedule K-1 been issued for an investment in an IRA account?

[Critter-3]

The minute you said the K-1 was from an IRA then it did not belong on an income tax return which is why it was removed ... it was not supposed to be on the return ... the program is correct.    If a 990 needs to be filed the broker is the one to do it ... please talk to them.  

[NJGlover]

Spoke to TD Ameritrade. You were correct. They take care of everything automatically, including paying the taxes directly from the IRA. In this case there were no taxes due.

Thanks for your feedback.

[Sportsfan48]

You do not file a 990-t  for a K1, if you are an individual taxpayer, if related to an IRA.  990-T is for a tax exempt organization.

[E]

If the Schedule K-1's investment is held in a Roth IRA account, does the same tax form reporting (i.e., form 990-T) still apply to Roth IRA? Thanks in advance for clarifying it.

[JulieS]

Yes, if the owner of the investment is an IRA, either Roth or traditional, the K-1 does not need to be reported.

This is because IRAs do not report current income or losses. 

[jannymv]

I've always understood that there is a very rare situation in which K-1 income in an IRA is taxable - If the amount in box 20V (unrelated business income) is greater than a certain amount ($1000 if I recall).  This is very rare - I receive several K-1s and have never had this happen. Usually it's a negative number. Brokers with which I had K-1 issuers in IRA's used to ask me to upload the K-1's for this, and then I'd get a notice to the effect that "good news you don't owe any tax on your K-1's" (which I already knew) several months later.  

[lei0829]

Hi sir, 

I question regarding the UBTI. What will be taken as UBTI, is it only dividend or capital gain as well?

[DavidD66]

UBTI is income that is received during the ordinary course of commercial business activities; it is income that is not related to the purpose of the IRA’s tax-exempt status, which is to generate income for retirement.  

Passive income such as interest, dividends, royalties, rental income, and most types of capital gains generally are not considered UBTI. However, capital gains from certain real estate investments may be subject to UBTI. 

[lei0829]

I mean I own BIP and BEP stock in my roth IRA, and these two company will post schedule k-1. I heard that if i get UBIT income more than 1000 dollars, I will be taxed even though the stock is in Roth IRA. 

So I need to know what will be considered as UBTI. Is it only dividend from BEP and BIP? or does it include the capital gain for these stock as well

[jannymv]

It's been posted on this thread by the Turbo Tax Expert what constitute UTBI - but frankly I don't know what constitutes UTBI and you probably don't either at least to figure out what's taxable in your IRA. The number is in box 20V of the K-1 and it's rare that it's more than $1000.

[DaveF1006]

According to this IRS source, UTBI is unrelated business income is income from a trade or business, regularly carried on  that is not related to the purpose of the IRA’s tax-exempt status, which is to generate income for retirement.  This includes dividends from BEP and BIP as well as the capital gains for these stocks as well.

@lei0829 

[1597980]

I just received a K-1 for both my IRA and Roth IRA.  I don't even have a box 20V, only box 20A and 20B.  

To recap what I understood from reading this thread: I don't need to report a K-1 issued to an IRA on my tax return but I need to reach out to my plan administrator and let them know and they will pay tax if any is due?  Would anyone confirm to me that this is correct?  I traded some ETFs in my account(s) and never realized they cause so much hassle!  

Thanks!

[DavidD66]

You do not need to report the K-1 you received for an investment you hold/held in a retirement account.  If the investments in your retirement account generated total positive UBTI across all applicable investments held equal to $1,000 or more, then Form 990-T must be filed, and the related tax paid.  Unrelated business taxable income (UBTI) is income earned by a tax-exempt entity, such as an IRA, that is not related to the exempt purpose of the tax-exempt entity. The exempt purpose of an IRA is to provide for the retirement of the IRA holder.  More than likely, you didn't have $1,000 or more of UBTI; moreover, if you did, your retirement plan custodian would probably file Form 990-T and pay the tax on your behalf, which would then be a distribution from your account.  If you think you may have had $1,000 or more of UBTI in an account, I suggest you contact the retirement plan custodian about how they deal with it.

[1597980]

Thank you for this clear explanation.  Sounds like I would not have UBTI.  I traded the ETFs a few times and had some gains in 2022 (big losses in 2023 already!).  But since taxes have a lot of traps, I wanted to make sure I don't accidentally miss anything.  Where would I be able to find UBTI on K-1? Someone mentioned box 20V, but my forms do not have that box, only 20A and 20B. I don't see a box description that says UBTI or "unrelated business taxable income" either.  Does this mean I can just file it away and do nothing about it?

[AnnetteB6]

Most likely, yes, you can file it away and keep it with your tax records.  Based on the IRS instructions for Form 1065 K-1, box 20 with code V is the correct place where unrelated business taxable income (UBTI) is reported.  So, if your K-1s do not have that entry, your IRA account would not be required to file Form 990-T.

If you want to be certain, contact the custodian of the IRA accounts and ask if a Form 990-T is being filed on your behalf by them.  

@1597980