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CVR Partners, LP Message Board

  • This is probably a dumb question but since Ag and the fertlizer business looks to be such a sure thing relative to many other investments I am considering putting this in an IRA account.
    Question-Is there any way to predict whether this MLP with have UBTI based on the nature of their business and will the UBTI probably be positive or probably be neqative? Is this discussed anywhere in their promotional or investment material ? I have read the IRS stuff and the MLP site on the benefits and perils of putting a MLP in an IRA. Any from other threads I have figured out the MLP pipelines or generally fine but the E and P MLP's are not. VNR is a typical example of a MLP you would not want in an IRA.

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    • You're correct but the only example of which I am aware is the message further up in this thread regarding Schwab and how they do it. Remember most MLPs generate negative UBTI and therefore no reporting is required, and a lot of brokers do not file the 990-T (and a lot of investors are unaware of the requirement as well)

    • ps mlpvestor is moneyonomics. changed my id to moneyonomics to be consistent across boards but every once in a while still hit mlp

    • thanks again, this is obviously a bit hit to the "interest" rate if you over $2300. my personal goal is to try for a net average of 8% return.

    • ps, another view is it is just timing of offsets/netting. eventually all gains and losses are netted. so I am saying 990 is same as 1040, it is just timing negatives and positives are offset and it is just timing. the more we have discussed this the more convinced I am that you can net and offset on form 990

    • To answer your question, No audit on my MLPs.

    • 18975 of 20361 at 4/7/2011 7:17:31 PM by

      In response to msg 18973 by abter1 ignore topic, view thread, thread start

      Re: UBTI project update
      I'm sorry I did not make my points as clearly as I should have.

      I was aware of rock-and-rents's perspectives that adding together negative and positive sums was NOT PERMITTED.

      When Schwab said that despite R-n-R's perspective - their own TAX EXPERTS had directed them to treat the UBTI the way I described - (they add together all positive and negative UBTI results in order to arrive at the total for a year). I argued with Schwab, for R-n-R's perspective, but not too vigorously, since it obviously was to my advantage.

      Frankly when I went back to R-n-R's original post, I realized that he added that he had never actually had to file a 990-T- so he had no direct experience. On the other hand Schwab apparently files many of these - or so they implied to me.**

      Note also that not ONLY DO THEY ADD UBTIs for disparate MLPs together in the same tax year, they add different tax years together, no matter which MLPs are involved. From my earlier post

      " I was amazed that they weren't at all concerned that the negative UBTI for 2008 came from different MLPs than did the positive UBTI for 2009. Apparently, they aren't concerned about the relative contributions to the UBTI total, but simply the resultant sum."

      Now if your broker is Schwab - that's the way they treat UBTI, or that's the way they treated my UBTI.

      Does anyone have a contrary experience?

      You also wrote...

      >>"One question; for the years you had negative UBTI's and Schwab filed a 990-T on your account to create a record of that, did Schwab charge you for doing that?'<<

      There was no charge to me - for any of the 990-Ts.

      ** It appears that R-n-R is reflecting rules for passive income and losses and applying those to UBTI. Apparently Schwab's tax people have discovered that UBTI is treated differently.

    • you have to provide copies of the K-1s to the brokerage. Some will file for you, some do not want to deal with it.

    • thanks did not understand that. how does the IRA provider know how much tax to take out of the account when they have no idea of the individuals income and tax rate ?

    • Here's the deal on UBTI. Your IRA will get a K1 from UAN sent to you. If you have more than $1K of UBTI across all your IRAs, you are supposed to pay tax on that. The tax is actually paid using funds from your account and the return is supposed to be filed by the IRA custodian (a/k/a your broker). UBTI generally equates to the operating earnings in Box 1 of the K1. (In a taxable account, that also gets reported on your normal 1040 tax return). For some MLPs, there may be adjustments to reduce UBTI such as depletion and other items. Most but not all MLPs generate NEGATIVE earnings in Box 1 due to deprecation, depletion etc. UAN, according to the prospectus will generating UBTI of approx $1 per unit.

      Some brokers (Schwab) are quite diligent about this. Others seem to disavow any knowledge of it and will not file the required 990-T tax return.

      There is also much confusion about offsetting positive UBTI from one MLP with negative UBTI from another as well as carrying forward negative UBTI from one tax year to the next. I've yet to see an official written source on that aspect of it.

      That's it in a nutshell

    • investor gets the k-1

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