Yes I believe Elliot Gue is incorrect. There are several sources of info on UBTI at the NAPTP website: http://naptp.org/PTP101/MLPs_Retirement_Accounts.htm
The Prospectus says there will be positive UBTI; the question is how much?
Yes, preparation and submission are the responsibilities of the custodian. However, payment of taxes and fee for preparation of the tax form are the responsibilities of the IRA owner.
this is a part of an article by elliott Gue on the internet, i met you on the WHX thread and you seem very knowledgeable on this stuff, do you think his comments are in error ? thanks
To qualify as MLPs, companies must generate at least 90 percent from the type of income that’s exempt from UBTI. The upshot: Only investors who garner more than $10,000 in income from a single MLP are at any risk to being assessed UBTI taxes in an IRA.
Moreover, energy producer MLPs often generate UBTI, while energy infrastructure MLPs often create “negative” UBTI. As a result, even if an investor has a significant UBTI liability with one MLP, he or she can offset it with negative UBTI at another MLP.
The bottom line is that for all but a small handful of investors, the UBTI issue is really much ado about nothing. And if the MLP is held within an IRA, the IRA is the unitholder and therefore the taxpayer. That means the investor doesn’t file a Form K-1. Rather, the custodian is responsible for filing an IRA Form 990T. Thus, even this complication is eliminated.
Since UBTI generally equates to Operating earnings, I would think it applies to both taxable and retirement accounts. According to the Prospectus, 1/2 of the distributions will be taxable and therefore you could infer that in a retirement account 1/2 will be UBTI.
On most state tax forms, there is a place to calculate and claim the credit for taxes paid to another state as a non-resident. Happens all the time with people who live in one state and work in another but also works for partnership income, royalties, etc. Whats your state of residence?
Might as well throw this out while we're on taxes. Most MLPs have negative operating earnings (for lots of reasons) which in effect makes the distributions received 100% tax deferred. However the UAN prospectus suggests that operating earnings might be equal to 1/2 of the distribution. Since all unitholders pay tax on their share of the operating earnings, in effect 1/2 of the distribution will be treated as taxable income (at ordinary income rates)