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Breitburn Energy Partners LP Message Board

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  • ltbhdollars ltbhdollars Feb 25, 2012 11:21 AM Flag

    Anyone Own BBEP in a SEP-IRA

    If you mean you deducted negative UBTI from another MLP against positive BBEP UBTI then beware, at some point the tax man will cometh. negative/positive UBTI summations are only allowed for the same MLP.


    You can easily check the tax code or for a simpler explanation: "MLP Passive Activity Rules Require Active Tracking

    “Passive” investments in MLPs result in certain unique tax ramifications that increase complexity. An investment in an MLP by an individual, estate, trust, personal service corporation or closely-held corporation is deemed to be “passive activity” by the IRS.

    This means that an investor cannot aggregate taxable income from one MLP with a taxable loss from another MLP. In essence, a “loss” you received from “MLP A” is suspended -- it cannot be applied to offset “income” in a different investment (such as “MLP B”) or other ordinary income (such as wages). You may not recognize these suspended losses until income from the same “MLP A” is allocated to you or your entire interest in “MLP A” is sold.

    For example, assume that in a particular year “MLP A” generated a $10 loss and “MLP B” generated a $10 gain. You must report the $10 gain from “MLP B” on your current year’s tax return. You suspend the $10 loss from “MLP A” and may use it to offset income from “MLP A” in the future or upon sale of “MLP A”, but you can’t use it to offset gains from “MLP B.”

    A key takeaway here is that it is important to track your passive activity, particularly the losses that you suspend."


    Summing positive UBTI with negative UBTI from another MLP when held within SEP/IRA/Roths is something promoted by a number of folks on the internet .... but at some point UNCLE will get most of them and it sure would be a shame to not only pay all those back taxes but also penalties with IRA monies.

    My two scents

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    • Outside of an IRA, your post is true, MLP-A items cannot offset MLP-B items. Inside an IRA and with respect to filing form 990-T I believe the MLP identities are not considered. I cannot find the IRC to substantiate this but citing a NAPTP article:
      You do not pay any tax yourself: the IRA is the unitholder and therefore is the taxpayer. The custodian of the IRA will be responsible for filing an IRS Form 990T. The IRA's share of all MLP income and of the deductions connected with the production of that income (as well as the income and deduction from any other partnership investments) is netted and entered on line 5, "Income (loss) from partnerships and S corporations." The "specific deduction" of $1,000 is entered on line 33. The deduction is subtracted from the amount on line 5, and tax is paid (out of the IRA funds) on the result, at the corporate tax rate. A statement showing the IRA's share of the partnership's gross income, and of the partnership deductions directly connected with producing the income, should be attached to the return.

      • 1 Reply to howardschubert
      • My prior post, as well as this, is only in respect to vehicles such as SEPs, IRAs and Roths which the IRS considers separate and distinct entities versus the beneficial owners and which they also consider as non profit entities.


        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).

        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.


        Above is an excerpt of discussion from a practicing CPA which also jibes with the firm I personally use.

        However I will again voice my thoughts that its CRAZY to base your tax preparation and therefore PENALTY EXPOSURE using internet posts.

        INTERVIEW prospective CPAs/Firms, determine their expertise and experience with MLP tax prep and select accordingly ... the number of firms that have no mlp foundation was surprising to me and an even bigger surprise were those that indicated they were competent and which after a little discussion were evident they had no clue.

        Once you have selected and employed a CPA, then discuss MLP consequences in and out of IRAs ... although the trustee is legally responsible for IRA prep and filing .. they can and may screw it up and you will need to understand the hows and whys if you hope to direct the trustee in correct prep.

        IMO, MLPs do not belong in any SEP, IRA, Roth etc .... especially E&Ps which generally and historically have very high positive UBTI with BBEP, ENP and VNR as examples of same.

        The above is all the opinion of an individual investor who would never dream of owning in an IRA (and hasn't) who is not a professional financial planner not a professional tax preparer nor a CPA ... and with this will leave this discussion.


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