I purchased 20 shares of a Energy Transfer LP in my Roth IRA through Etrade. At the time I did not know anything about LPs. I sold it last year as I learned more about LPs. I received a K1. It did not make any money. There are about 30 states listed, but all report zero in the far right column for reporting state tax, thankfully. What do I need to report on my tax return for this year? What form would I complete?
If the shares of the partnership were purchased within your IRA, then the K-1 should be reported to the Federal ID number of your IRA instead of your Social Security number. If that is the case, then you do not enter any of the K-1 information on your personal return. Keep it for your records.
Look for the partner's ID number shown on the left side of the K-1 to be sure your Social Security number is not there.
Note the Energy Transfer LP [an aggregated partnership of Entergy Transfer Partners LP and ET Energy Transfer LP holds additional MLP and report all within the Schedule K-1 package. They must be filed individually and not as the aggregate. Furthermore, the partnships reprot Ordinary Business Income which is outside that permitted within a Qualified Plan account thus requiring the reporting of Unrelated Business Income IUBIT) on Form 990 or 990-T. In general, it is ill-advised to hold MLP partnership interests, which are themselves a form of deferred income inside a Qualified Plan!
Unrelated business income is reported on a 990-T form.
If you hold a Limited Partnership or LLC in your IRA then any Unrelated Business Income in excess of $1,000 is taxable (even though it is in an IRA). It is not reported on your tax return but on a 990-T form. (The custodian of your IRA is required to file the form for you but you must submit the K-1 form(s) to them - ask the custodian about this).
Unrelated Business Income is reported as code "V" in box 20 on the K-1 form.
Also see pub 598.
<a rel="nofollow" target="_blank" href="http://www.irs.gov/publications/p598/ch01.html">http://www.irs.gov/publications/p598/ch01.html</a>
Per the 990-T Instructions: <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i990t.pdf">https://www.irs.gov/pub/irs-pdf/i990t.pdf</a>
"Who Must File
Trustees for the following trusts that
have $1,000 or more of unrelated trade or
business gross income:
1. Individual retirement accounts
(IRAs), including traditional IRAs"
4. Roth IRAs described under section
408A,
my point was that this issue of importance was missed in the original answer
Since line V says $-6, I am under the $1,000 threshold. The overall value of the stock was $323. So since I am under $1,000, does form 990-T still need to be filed? Since I am under the $1,000 threshold, no action?
In general, I should not need to file anything for my Roth IRA in this case? If anything, ET LP would if $1,000 or more. Since under $1,000-no file?
As a side note, I sold the ETP LP before it merged with ETE LP and became ET LP.
1. As your MLP income was under $1,000, no 990-T filing is required, and good choice in selling off the ET/ETP/ETE
partnership(s).
Why? @Scruffy_Curmudgeon ? I have held MLP's in my IRA for years and they have a good return and have never been close to triggering a 990 - a few dollars at most.
But on the other hand, the eventual release of those disallowed losses will never benefit you since the IRA cannot take a tax loss.
Makes no difference if the security is making a good return. They trade on the stock exchange the same as a stock.
True, but that financial benefit is lost to the IRA account holder if retained in the IRA as opposed to a non-Qualified Account.
It depends on the circumstances. The gains grow tax free within the IRA but are taxable income outside of the IRA. In addition taking investment money out of the IRA to invest in a non-qualified account results in a big tax hit just to establish the non qualified account. (I don't have "other funds" to invest.)
I was suggesting that the first point that you agree with - namely that the gains grow and are taxed as ordinary income and not as gains - is the reason not to place an MLP into an IRA to begin with.
Hi, I read thru this series of Q&As, but I am still not quite clear on how to process it. My situation is I have a ROTH IRA with TD Ameritrade, and I trade a few times Energy Transfer (ET) stocks in 2021 and I had more than $1000 gains. Now I got K-1 from the ET, and also 990-T from TD Ameritrade. TD Ameritrade indicates it will file the 990-T to IRS on my behalf and take money out of my ROTH IRA to cover the tax due. So now my questions are:
Thanks. I appreciate it if you can shed some light on my case.
Thank you very much for answering my question. I get that my 1040 does not connect to the 990-T now. But what is 990-T, why am I getting hit by this Tax just investing in the ET stock? I'd appreciate it if you could explain a bit.
When unrelated business taxable income ("UBTI") is earned by a tax-exempt entity such as an IRA, and the total amount earned is $1,000 or more, the IRA must file Form 990-T, and any resultant taxes must be paid by the IRA.
Normally the filing of Form 990-T and the payment of the taxes is handled by the IRA custodian.
None of this is reported on your personal tax return. It is all handled within the IRA. No 1099-R is issued for these transactions.
Usually UBTI is earned by Limited Partnerships or Master Limited Partnerships that are held by your IRA. When an IRA owns an LP or MLP, it becomes a partner in the partnership. Hence it shares responsibility for the taxes due on the partnership's unrelated business income.