I just received a Schedule K-1 (Form 1065) from APL for a portion of stock I sold in 2010. This sale is part of my IRA for which I am obligated to take out Mandatory Withdrawels each year since I am over 69.5 years old. There is no question that I would have to report this income if it was NOT part of my IRA but since it is do I just ignore this and pay taxes only on my yearly withdrawels?
As to your personal tax return, you ignore the K-1 that was issued to your IRA, and pay taxes on your IRA distribution, as usual.
As to your IRA, look at box 20V on your K-1 (lower right hand corner). That number reports the unrelated business income that is taxable to your IRA. Normally, that box shows a loss, so that you have no reporting obligation for your IRA, either. (IRAs are only taxable on unrelated business taxable income, or UBTI, to the extent it exceeds $ 1,000. The definition of UBTI excludes sales of assets other than inventory, so APL's gain on the sale of the system in 2010 did not constitute UBTI.) Assuming there is a loss on box 20V, there is nothing you are obligated to do with regard to your IRA, either.
I don't know what broker you use. My IRA is at Schwab, and Schwab sends me a letter each year asking me to send them the K-1s that my IRA receives. If there is a profit, they file a tax return (and I assume charge my IRA for the tax, but I've never had a tax liability). If there are losses, they can also file to establish a loss carryover for my IRA. I assume other brokers do the same, but who knows?
And I doubt the average preparer at Block knows much about UBTI.