Solved: When is income from an MLP held in an IRA/SEP account taxable?
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When is income from an MLP held in an IRA/SEP account taxable?

I have received a K-1 form from an MLP held in my IRA/SEP account listing "Unrelated business taxable income" greater than $1,000. Is such income taxable? 

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When is income from an MLP held in an IRA/SEP account taxable?

No, that income is not taxable to you. 

Any income that is reported to your retirement account would not be taxable until you take a distribution from the account.  Then it would be taxed as a retirement distribution.

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New Member

When is income from an MLP held in an IRA/SEP account taxable?

No, that income is not taxable to you. 

Any income that is reported to your retirement account would not be taxable until you take a distribution from the account.  Then it would be taxed as a retirement distribution.

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When is income from an MLP held in an IRA/SEP account taxable?

Does this answer apply as well  to "Unrelated taxable income" that is reported in the K-1 received from the partnership?
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When is income from an MLP held in an IRA/SEP account taxable?

If the K-1 is "owned" by your retirement account, none of the amounts need to be reported on your return.
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When is income from an MLP held in an IRA/SEP account taxable?

If your IRA earns more than $1000 in a year in UBTI (Unrelated Business Taxable Income); the IRA custodian will need to complete and file a Form 990-T and pay the "excise tax" due.  That tax money is removed from your IRA.  In addition to the taxes owed; starting for the 2018 tax filing year, Fidelity charges a $300 fee for completing the 990-T and paying the tax/penalties for you.  I don't know if other brokerages charge similar fees.

The details for this policy can be found at: https://www.fidelity.com/tax-information/tax-topics/ubti

Most MLP's will not generate more than $1000 of UBTI per year. Only 2 of my 9 MLP holdings show a positive UBTI value on the K-1 box 20-V.  The 2 that had a positive UBTI have been owned for at least 10 years.

Paying that $300 fee to Fidelity and still owing the tax would definitely eat into any advantage of holding the MLP which generates UBTI greater than $1000/yr in an IRA.

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