Posted by lessarda on 29th of Jun 2011 at 01:14 pm
It is only UBTI "Unrelated Business Taxable Income" in a
partnership exceeding $1K for the partner in a given year that
triggers a special 990T from the custodian and is taxable. UBTI is
notthe same as return of capital, which reduces basis in a
partnership. Also, it is likely to be only MLP's like KMP or EEP
that generate UBTI at all (and it could be negative rather than
positive). I got about 6 K-1's for IRA trades last year (including
USO and currency ETFs) and not one had any UBTI. So there was no
taxable event. The partnership does still have to send the K-1 no
matter what form of account you have.
Also, if you trade Kinder or Enbridge, you can use KMR & EEQ
rather than KMP & EEP to avoid the UBTI issue entirely because
they pay distributions in shares.
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
A CPA has clarified this issue for me:
Cautionary Note on Purchasing USO
Posted by lessarda on 29th of Jun 2011 at 01:14 pm
It is only UBTI "Unrelated Business Taxable Income" in a partnership exceeding $1K for the partner in a given year that triggers a special 990T from the custodian and is taxable. UBTI is notthe same as return of capital, which reduces basis in a partnership. Also, it is likely to be only MLP's like KMP or EEP that generate UBTI at all (and it could be negative rather than positive). I got about 6 K-1's for IRA trades last year (including USO and currency ETFs) and not one had any UBTI. So there was no taxable event. The partnership does still have to send the K-1 no matter what form of account you have.
Also, if you trade Kinder or Enbridge, you can use KMR & EEQ rather than KMP & EEP to avoid the UBTI issue entirely because they pay distributions in shares.