That EPD is a partnership and its payout is considered different from a dividend, and this cash can be taxed even inside a regular or Roth IRA. Is this true?
A couple of facts about MLP passive loses. The only reason you get to claim passive losses upon sale is because those passive losses reduced your tax basis every year (and therefore increased your gain upon sale). Thus, taking the losses is just a way of getting your basis back where it "should be". You have no basis in an IRA or to look at it another way, your basis is $0 since everything is taxable and passive losses really don't apply.
In an IRA, you have total tax deferral until you sell AND withdraw the funds; you then pay ordinary income rates. In a taxable account, most of your tax deferred distributions are going to be taxed as ordinary income upon sale and the difference between your original purchase and sale price as capital gain.
If you like to trade MLPs, do it in an IRA; trading MLPs in a taxable account can be a real tax nightmare.
I guess I have to ask you if you have sold MLP's in an IRA and taken withdrawals? If you have, do you also file a 1040 with the IRS every year? If so, then you are paying taxes as Ordinary Income for your MLP transactions and you cannot claim pass-through losses as identified on the K-1. You are losing the tax shelter characteristics of your MLP investment.
One of the posters has posted these words:"The biggest disadvantage of holding MLPs in a IRA is you can't take losses if your investment drops in value and there are no capital gains - everything is taxed as ordinary income upon withdrawal."
Under these conditions, you are forfeiting the primary advantage of MLP's which is tax sheltering. This is legal tax avoidance. You are avoiding your tax avoidance potential.
I am not spewing, that is the plain fact. If you do not understand this, I can only surmise that you do not submit an annual 1040 and are a tax evader. Then there is no problem until such time as you get caught. Then the interest and penalties add up rapidly.
If you sell an MLP in a traditional IRA and take credit for the tax preference features, you are subject to an unfavorable audit from the IRS. Taxation within a traditional IRA nullifies the tax preference characteristics of the MLP.
My wife has 17 years experience as a tax professional including Enrolled Agent status (if you know what that means). Her advice is the strategy of placing an MLP investment in an IRA is INSANE! A Roth is less noxious if you hold the investment there for a minimum of 5 yrs, but there are still significant disadvantages to that.
If you want the details, see your tax professional!
There is no way I would make a decision on the information shared on this, or any other, message board.
There are plenty of tax professionals that can shed light on the matter.
The one thing that most people forget is simply this.....a lot of investors only have investable cash in their Traditional IRA's. If they are going to enjoy the returns and stability offered by the MLP's, they really don't have any choice but to own the shares in a traditional IRA. The custodian is responsible for the K-1's, etc.
I am sure that there are exceptions but, can we agree that at worst, only a portion of the "returns" would be taxed. It isn't like they are going to "take it all".
rwhite wrote: "any dividend paid into the ira becomes part of the ira and is taxable only when withdrawn from the ira. "
This is true. But MLPs like EPD do NOT pay 'dividends' - they pay 'distributions' that are reported on K-1s. And 'distributions' create UBTIs [sometimes positive but mostly negative] when held in an IRA. And UBTIs over $1,000 create a taxable event when held in an IRA - even when not removed from the IRA.
This issue is covered in the MLP primers - and links to the primers are frequently posted on this site. This issue has been asked and answered repeatedly on this site.
I am beginning to come to the conclusion that this message board is under mild attack with overly dumb and repetitive questions - and the right reaction is for the regulars to just 'one star' those queries [and posting of mis-information like rwhite's] and move on.
Since you are too lazy to look at other posts on this board about this same topic, why don't you do yourself a favor and go to
and read the Wachovia primer and some of the other materials.
After you have done that, then if you have questions, ask.
Really, again, the same question over and over again. Does anyone read about companies before investing in them or just look at the yield and click buy. If you had read up, you would know that you do have to pay taxes in an IRA which is WHY YOU SHOULDN"T OWN AN MLP in an IRA. Factoids will be along shortly to give you the nice definition and I don't mean to be rude, it's just that the only messages on this board now are about this and it's getting a little old. And it's not the distribution that's taxed.
I didn't buy the stock yet, that's why I am asking before I do. And yes, I did not feel like looking all over the board for the answer. So just answer the question without being a prick. It's not like you have more important things to do.