I'm 91 years old and need to be told again why MLPs are not suitable for IRAs. There may be a hole in my brain where things slip away. Re the IRA, the dividends come in and the sales price comes out. From my point of view, the dividends are still in the IRA and I use them to buy other stocks. I don't see how dividends from a MLP inside an IRA can be treated differently from dividends from other stocks. If you taxed the MPL dividend when it came in the IRA, you would be taxing it twice, once coming in and once going out. Turbo Tax doesn't seem to make any distinction between a MLP dividend and a non MLP dividend. Don't tell me I am nuts! I hear that enough from my good wife.
They're only unsuitable if you have large MLP positions. There are complicated tax matters that puts parts of your return of capital into different buckets- a small percentage is taxable only if it is over $1K I think it is. If you are getting less than $10-20K per year in MLP distributions, I think you can safely throw them in the stove. I sincerely doubt the I-R-S has it together enough to even know who owes and who doesn't. If you get audited, they may put you through an exercise, but in the end, you will likely not owe anything more or a negligible amount. I'm clearly not an accountant but looked into this years back- I don't remember all the particulars-- just a rule of thumb. If you're taking down $30-$50K+ annually in MLP distributions to your IRA, I would definitely talk to an accountant.
I also have several MLPs in my IRAs, and I get these K-1s. My IRA is with Schwab, and they are supposed to file these K-1s, so I send all my IRA K-1s to them and they send them to Uncle Sam.
There's really only one thing on those K-1s the govt. is interested in; Line 20, Code V -- Unrelated Business Income. Don't hold me to this, but I think it will probably NEVER make a difference on your taxes -- unless you are a major holder of the partnership. There's often a loss on this item, which is good, because it will offset gains in future years......
Hohoterry, I've had a few MLP's in IRA's ,and just toss the K-1's in the woodstove. I was told at the time
I bought APU it was great for an IRA,but not to exceed say,15% of total. So maybe if the IRA was heavily
weighted with MLP's then the taxman would surface? Added KMP to the IRA recently.I think the Government
gave away the farm with the Roth IRA,we haven't touched ours,and hope we don't have to,just let'em grow.stuce
I have had TCP at different times in my IRA, it is MLP, nice divi, I took the K form to my accountant, he said you don't need that it isn't taxable ..So, you are right, it doesn't get taxed, at least at this point in time
How does an IRA handle a return of capital from an MLP.......seems like that might mess with your annual contribution amount for a ROTH IRA? Hold on to those K-1......taxman wants to know your cost basis when you sell. I use the MLP funds in the IRA accounts, and hold individual MLP's in a brokerage account. Don't know why, just what I do! K-1's aren't all that bad to figure for taxes, just wish they came in the mail earlier than late March.