Is income reflected on k-1 from mlp taxable if held in retirement account

[arauzodra]

I received a k1 for a master limited partnership held in my 401(k) account.  The UBTI is less than $1,000 so there is no UBTI tax.  However, are the other income line items (interest, dividends, royalties, capital gains) subject to reporting and taxes on my Form 1040 even though this is an investment in a retirement account?

 1 comment

taxability of mlp in 401(k)

Nothing in a retirement account is taxable on an income tax because it is housed in a tax sheltered entity ... only the UBTI is applicable.

• Critter#2
 
• 38 minutes ago

taxability of mlp in 401(k)

Can you cite IRS codes/sections/law supporting that position?  I received an IRS notice adjusting my income tax return to include the above-referenced K-1 income items.  The K-1 properly reflected the ownership entity as an IRA/SEP account.  The IRS Response Form requires a statement (along with any supporting documentation) indicating the reason for disagreement with their proposed income tax changes.  I would like to reference the tax code/section and verbage regarding the exclusion of mlp income for retirement account holders.  I have been unable to locate this information online.  Thanks!

[Critter]

IRAs and Retirement accounts are called tax shelters because they shelter the income earned in them from tax until a later date .... this is a general fact ... so if the account is correctly listed in the IRA's name you should just have to point that out to the IRS ...  

What are some tax advantages of an IRA? 

Two tax advantages of an IRA are that:

• Contributions you make to an IRA may be fully or partially deductible, depending on which type of IRA you have and on your circumstances, and

• Generally, amounts in your IRA (including earnings and gains) are not taxed until distributed. In some cases, amounts are not taxed at all if distributed according to the rules.

https://www.irs.gov/publications/p590b#en_US_2016_publink1000230302

Exception to the generally not taxable rule is the UBTI which may require a form 990-T...

https://www.irs.gov/charities-non-profits/unrelated-business-income-tax-special-rules-for-organizati...

http://finance.zacks.com/report-k1-ira-account-7692.html