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Kinder Morgan Energy Partners Message Board

  • mriker2000 mriker2000 Sep 27, 2011 12:14 AM Flag


    I bought this company in a Rollover Ira at Schwab. I sold before any distributions were give to me. The short term capital gain is $63.00. My question how to file a tax return on a IRA with K-1 information.

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    • So, let me get this are 43 years old and taking distributions from your IRA now?

      I really thought I could help you out with the tax question but for the moment, I can't begin to understand why you're even in an IRA, trading in an IRA that you take distributions from at AGE 43!!! I'm sure I missed something here???

    • you said this is in an IRA. Under NO CIRCUMSTANCES do YOU ever file anything with the IRS relating to owning MLPs inside an IRA (unless you withdraw funds from the IRA...but that has nothing directly to do with owning any assets inside the IRA).

      The only thing that is ever filed with the IRS regarding MLPs held in an IRA is filed by the brokerage holding the IRA...not by the investor who owns the IRA. The return the brokerage may have to file is form 990-T.

      Your brokerage will probably ask you for a copy of the K-1 when you get it. They don't automatically get a copy of the K-1 (although they are responsible for determining if a 990-T must be is weird). If your IRA owes UBIT on your MLPs in your IRA, your brokerage must pay those taxes from assets within the IRA. Some brokerages charge for filing a 990-T (much like an accountant will charge you for each K-1 associated with your personal return). A good brokerage will probably file a 990-T each year even if your IRA does not owe UBIT that year...they can claim this years losses (negative reported income) in future years if they file each year to establish the track record.

      Given we are talking about KMP here, it is EXTREMELY unlikely that the brokerage will actually have to file a K-1. KMP is extraordinarily tax efficient, and it is very unlikely that the IRA holdings of a short term KMP investor will surpass the filing thresholds. However with short term investments weird things can happen; think of it as the chance of owning on an "unlucky day". For example, if an MLP sold some assets at a substantial profit (which would be reported as income to the partners) one month, and then the next month sold other assets at a substantial loss, those profits and losses could net out to nothing on a full year K-1. However, in this purely hypothetical case a short term investor may own on the wrong day, and have a big slug of income show up on their K-1.

      MLPs do not calculate all the aspects of the K-1 for each investor every day; most do it once a month, and others actually only do it once a quarter. So it is entirely possible you could have owned for a few weeks and never get a K-1 (if you never owned on "calculation day"), but also possible you could own for just a few days...including a "calculation day".

      For whatever it is worth, I am not a big fan of short term trading of MLPs. You can get into weird tax situations such as I mention that have virtually nothing to do with your investment gains or losses over the short term you owned. As I said, this is just my opinion. I know there are folks who do believe trading MLPs can be profitable and worth the tax reporting burden and risks.

    • yu will have to file schedule d to indicate a capital gain.
      on the k1, if you get one, they will provide an intenal dividend figure in block 6b, and an interest figure on block 6a. the dividend and interest will be reported on schedule b.
      thats it.