Limited Partnership in a Roth IRA

[Tauepsilon1920]

I purchased some shares of  a Limited Partnership in 2020 and again earlier this year in my Roth IRA.  I didn't know about Unrelated Business Income (Box 20, code V of schedule K1) can be taxed even in a Roth account, if >$1000.  Now after reading about UBI recently, I decided that I want to get rid of all my shares of Limited Partnership from my Roth IRA (my UBI has been <1000 each year so far).   My questions are:

1) Does it matter if I sell my LP shares immediately (short-term) after purchase or do I have to wait after a year before selling?

2) Does the UBI resets each tax year or is it cumulative over the course of me holding the LP in my ROTH?

3) Let say the the cost of my LP shares are $500, and I sold them for $2000.  Does the capital gain of $1500 count towards the UBI limit that triggers it to be taxable now in my Roth?  

4) Does the aformentioned $1500 capital gain ever get taxed? or is it treated the same as other investments in Roth IRA where its withdrawal can be taken out tax-free in retirement?

5) I read somewhere that it says when selling LPs, there can be a recapturing of appreciations/depreciations which can render the UBI >1000.  Where can I find these information about my particular LP?

6) I'm planning on selling a few shares of LP from each year until they are all gone, is there a way to know how many shares I can sell in a year to keep the UBI under 1000?

thank you so much!

[DavidD66]

Unrelated Business Income (UBI) is determined on an annual basis.  It is not cumulative.  If you own shares of a Limited Partnership in an IRA account (Traditional or Roth) your sale of those partnership shares is not a taxable event. You won't incur any taxes within the account on your disposition of them, regardless of how long you've held them.  UBI has nothing to do with your sales activity of shares of the LP.  There is nothing you do with your shares that will trigger UBI, it's based upon the activities of the LP.   The sale of LPs can trigger ordinary income in addition to capital gains, but only in Non-Qualified (taxable) accounts.    If your position in the LP is approximately $2,000, it is  highly unlikely you will have UBI in excess of $1,000; however, if you want to divest yourself of the LP, you can sell it all at once and it won't have any impact on any potential UBI.  Nor will it result in a taxable gain (or loss).  

[Tauepsilon1920]

thank you so much for clarifying it for me.  I appreciate it. 

[DAYLEA]

I appreciate you explanation but please let me clarify.   If I have a limited partnership in a Roth IRA, and my LP generates UBI on a K-1.   Will I need to pay taxes relating from the UBI?   or because it is a tax free Roth can I just disregard the generated UBI by the LP?

[RobertB4444]

Usually, a Roth IRA must file a form 990-T if its Unrelated Business Taxable Income exceeds $1,000.  

You should consult with a tax professional on this one.

Here are the IRS regs on UBTI.

@DAYLEA