How does the K-1 for work for reporting?

[jamesrath1970]

I purchased stock from ETP (small amount) on ETrade and received $24 in dividends.  I reported this as 1099-DIV. However, after following up on this, it appears that I need to obtain the K-1 form for reporting.  Now what? Do I need to file an amendment to my tax return.  What is different about the K-1 than the 1099-DIV?  Secondly, can I move this stock to my ROTH IRA, if so, then do I not have to worry about taxes on this stock in the future?

[TomYoung · Accepted solution]

"What is different about the K-1 than the 1099-DIV?"

You are now a partner in a partnership, you're not an owner of "shares" of a corporation.  Partnerships do not pay income taxes.  Instead they "pass through" to their partners all of their economic activity, reported on Schedule K-1 and the partners then enter this economic activity in their own personal income tax returns.  Accordingly, partnerships don't pay "dividends" they make "distributions" and most commonly these distributions are treated by the partners as a reduction in the basis in the partnership.

So I'd say an amendment is in order.

You'll have to sell and re-buy if you want to hold this ETF in your Roth.  You can't do in-kind contributions.

Tom Young

[jamesrath1970]

Thanks. So if I sell and then rebuy in my ROTH IRA, is it exempt from taxes in the ROTH IRA?

[TomYoung]

Yes, though you need to be aware of UBIT. https://www.irs.gov/charities-non-profits/unrelated-business-income-tax

[jamesrath1970]

Not sure I understand your response. ETP is for profit. Wondering if dividends paid through the partnership is exempt from tax under a ROTH IRA?

[TomYoung]

Your Roth IRA becomes a partner in a for-profit activity an activity considered an unrelated business income.  Your IRA is also an exempt organization.  "An exempt organization that has $1,000 or more of gross income from an unrelated business must file Form 990-T."  

So you can have the partnership in the IRA,  You just don't want it become so large that the IRA  has to file a 990-T.

[jamesrath1970]

Is the $1,000 threshold per year? Or accumulated through time?