There is a long thread with about 10 posts with totally incorrect information about MLPs like NS and taxes. BEFORE, hopefully, you buy a MLP go to the NAPTP website (National association of Publically traded Partnerships) and read their primer on MLPs. All owners need to understand that you report your taxes using a K-1 and not the broker 1099. That you can have taxes due on MLPs held inside an IRA. That a MLP deferrs taxes, it does not eliminate them thus selling after holding for many years can be expensive because of recapture of depreciation. Last, that a sale of part of your holdings in a MLP makes a sale even more costly taxwise and much more complicated to file.
The tax code does not allow tax-exempt institutions and retirement funds to defer tax on income generated outside of their core businesses. MLP income payments are considered earned directly by the partners. Because IRAs are not in business to transport natural gas, for example, distributions from MLPs could be considered unrelated business taxable income (UBTI). This makes them immediately taxable. Usually only a portion of MLP income payments are considered UBTI. The K-1 form will split out the taxable portion.
There is a tax deduction for the first $1,000 in UBTI each year from all sources within your tax-deferred accounts. Any UBTI over $1,000 is taxed as ordinary income in the tax year it is earned.
So unless you own a ton of NS, fugetaboutit.
Except that when you sell your units, the recapture of all the distributions you received over your holding period is considered as UBTI. So there may be a big tax liability for your IRA if and when you sell your units.