Per investor relations distributions from NTI are believed to be 100% UBTI. 50% of distributions are projected to be not currently taxable. Approximately 83% of the income reportable is deemed to originate in MN. MN allows approximately 18,000 of annual income for a married couple filing jointly to be earned before a tax liability is incurred.
UBTI in an IRA triggers reporting requirements when it exceeds 500.00 and creates a tax liability when it exceeds 1,000.00. There are MPLs that do not generate UBTI and some that generate negative income which is netted so someone who is quite familiar with MPLs could hold NTI in their IRA without incident but it is not a wise move for the those who don't find researching taxes to be extremely interesting.
Hope this helps someone.
It is my understanding that UBTI in an IRA is netted for the whole account. If the net is $1000 or more then you will owe tax. So negative UBTI can offset positive UBTI. Have been doing that for years.
You may have been doing it, but it not the correct way to do so.
1) No, you cannot net positive and negative UBTI for different MLPs.
2) Yes, you can carry forward negative UBTI to offset positive UBTI from that same MLP in future years.
3) The $1,000 applies to each separate IRA.
1) One of the rules you and I have to use in calculating taxable income is the PTP passive loss rule of IRC Sec. 469(k)(1), which says that you cannot net a loss from a PTP against any other income except for ordinary income from that PTP (at least until you sell your entire interest in the PTP, which releases all suspended losses). This rule is not mentioned in or modified by IRC Sec. 512(b), and thus also applies to the computation of UBTI. If you have negative UBTI from a particular PTP, it cannot be used to offset positive UBTI from another PTP. Note that this results from the specific rules applicable to PTPs. If you had negative UBTI from, say, a privately syndicated real estate partnership that is not a PTP, that negative UBTI could be used to offset positive UBTI from another real estate partnership. But under IRC Sec. 469(k)(1), you have to calculate income or loss separately for each PTP, and cannot use losses to offset income from other PTPs.
2) Once again, the general PTP passive loss rules of IRC Sec. 469(k)(1) apply here - just as on your and my 1040, the loss from a PTP is suspended and carried forward, and then available to offset income from that particular PTP in a future year. Thus, negative UBTI this year from a PTP gets carried forward and is available to offset positive UBTI from that same PTP in future years.
IV Board from rock_n_rent
I remember several long and heated arguments on other MLP boards about whether negative UBTI could be offset against +UBTI from another MLP. Don't know if that was question was ever resolved. Do you or anyone else have any insights?
And what is the size of the investment in Nti that would trigger more than $500 in UBTI. The wealthy do have more tax problems and I've always gotten around that by not being wealthy.
Sentiment: Strong Buy
"Per investor relations distributions from NTI are believed to be 100% UBTI."
I thought I remembered hearing that but wasn't sure.
In addition to the $1000 threshold you mention (which could be easily reached by a moderate size position in NTI, I would think), the even bigger consideration is on sale when all that deferral becomes due and is considered UBTI.
I would consider NTI to be unsuited for an IRA account for these reasons. The IRS is not enforcing UBTI on small account IRAs at the moment (however they started enforcing it on larger accounts), but I believe are moving in the direction of doing so. You can see that by the fact that they added a new box to the K1 starting in 2012 with the box indicating whether the account if a IRA type account.
I would suggest keeping NTI (or other refiner MLPs) in an IRA is a big gamble, assuming that the IRS will continue to not enforce the rules for smaller accounts.