I was wondering if any message poster owns BBEP in a IRA or SEP-IRA, and if so, if they could tell me how much UBTI (Unrelated Business Tax Income) was paid out by BBEP for every 1000 shares of BBEP that an investor owns?
A few days ago, I purchased 3000 shares of BBEP for my SEP-IRA. I was/am fully aware of BBEP being a partnership, and therefore, the tax consequences should BBEP pay more than $1000.00 per year in UBTI income. Does anyone on this board have any experience in owning BBEP in their retirement account and did they have to pay tax on this investment, even though it was in a tax-deferred account like a SEP-IRA? Thanks for your help.
I'm also not an expert but rely instead on my interpretation of IRC and the 990-t instructions, as well as expert opinion where the law isn't clear (as in this case). The article I cited is at http://naptp.org/PTP101/MLPs_Retirement_Accounts.htm
It's an opinion from the National Association of Publicly Traded Partnerships and is not to be construed as gospel but it seems to agree with the way fiduciaries such as Schwab are handling UBIT. I would tend to agree with this before relying on a few anonymous accountants as I know from experience that the tax professionals are not all in bed together on this. As far as having MLP's in a retirement account, I am not in favor of it, but it isn't illegal so to each his own.
Christine Benz,Morningstar's director of personal finance,and author of several published articles,disagrees with your experts.(MLP's Good Investment,Lousy Choice for an IRA 1-27-11 "you can even use them (negative UBIT)to cancel out UBTI from other MLP's".Several websites for IRA custodian's disagree with your experts.(e.g. Myself Direct)See also "Divedend Growth Investor.You may be corrrect and therefor don't hold MLP's ,especially E&P's) in an IRA.Sure would like to see a Reg. or tax ct case because there seems to be some credible information to support aggregation.GLTA
I take issue that I misinterpreted tax law in my two posts and I must have been inartful in their construction, if such is the case, I apologize.
I hopefully clearly identified that I was NOT a tax professional of any sort be it tax lawyer, financial planner or CPA.
I am not attempting to interpret anything but did attempt quoting 4 different professional sources that deal with MLPs, all of whom are following the same exact playbook.
I also clearly marked the quoted material (but did not then identify who the professionals were) in my first post which was an excerpt from a public article by Shobana Gopal, CPA and Michelle Kelly, CFA dated January 27, 2012
My second posting clearly stated I was posting a discussion excerpt by a practicing CPA which matched the position taken by the tax firm I use.
So while you may disagree with these four professional sources, I was a messenger attempting to relay tax interpretations, not by me, but professional people dealing with these issues on an ongoing basis.
You may choose to disagree with these four congruent opinions and its always possible that all four are incorrect but it is also very certain that if MLPs are not held in IRAs then the issue will never surface.
itbhdollars is misinterpreting IRC 469(k)(1), the code section doesn't even mention UBIT. Read the instructions for form 990-T and you will see that all income(loss) from partnerships & S-corps are entered on line 5 with a statement attached listing the individual entries. They are aggregated...period. This has nothing to do with the passive activity rules.
Thank you!One poster on BBEP's board cites IRC 469(k)(1) for the propositionthat aggregation is not allowed even for IRA's but Schwab and other sources maintain that aggregation is allowed when determining the 1000$ threshold for filing a 990-t
Each K-1 is different per the individual purchase date...
My experience is that BBEP has a bit heavy UBTI compared to my other MLP's
My guess is that if you are over 5000 shares or so... you might be over the $1000
If you mean you deducted negative UBTI from another MLP against positive BBEP UBTI then beware, at some point the tax man will cometh. negative/positive UBTI summations are only allowed for the same MLP.
You can easily check the tax code or for a simpler explanation: "MLP Passive Activity Rules Require Active Tracking
“Passive” investments in MLPs result in certain unique tax ramifications that increase complexity. An investment in an MLP by an individual, estate, trust, personal service corporation or closely-held corporation is deemed to be “passive activity” by the IRS.
This means that an investor cannot aggregate taxable income from one MLP with a taxable loss from another MLP. In essence, a “loss” you received from “MLP A” is suspended -- it cannot be applied to offset “income” in a different investment (such as “MLP B”) or other ordinary income (such as wages). You may not recognize these suspended losses until income from the same “MLP A” is allocated to you or your entire interest in “MLP A” is sold.
For example, assume that in a particular year “MLP A” generated a $10 loss and “MLP B” generated a $10 gain. You must report the $10 gain from “MLP B” on your current year’s tax return. You suspend the $10 loss from “MLP A” and may use it to offset income from “MLP A” in the future or upon sale of “MLP A”, but you can’t use it to offset gains from “MLP B.”
A key takeaway here is that it is important to track your passive activity, particularly the losses that you suspend."
Summing positive UBTI with negative UBTI from another MLP when held within SEP/IRA/Roths is something promoted by a number of folks on the internet .... but at some point UNCLE will get most of them and it sure would be a shame to not only pay all those back taxes but also penalties with IRA monies.
My two scents
I really don't have a definitive answer. I've owned a number MLPs in my simple IRA for a bunch of years now haven't filed anything. And as far as I know don't need to do anything other than pay tax on the withdrawal. If the IRS is reading this my name is Jose and now living in Mexico.
I'd like clarification on this too. Is it based on getting $1,000 on a particular MLP or is it all of an investors various MLP payments added together-even if some are in an IRA and others in a personal account?