I hold RNF. I have been told that I cannot buy shares in an IRA account I never heard this and think this advice is bogus. The question I have is whether I can buy MLP shares for an IRA account or not. Have checked some sources but can't find a direct answer, in fact all my research as not shown any limitation and its hard to prove a negative. So I will appeciate anyone telling me whether MLP stocks can be bought for an IRA. Thanks in advance for any advice or assistance.
Yes, you can put MLP's in an IRA - at least the traditional one. I do not know about the Roth.
The MLP's send K-1 forms issued at the end of the year. Not by any means is the total distributon "income". The first 1000.00 of Unrelated Business Income is excluded from taxation. After that threshold, the IRA account has to pay a tax [not you personally] which the IRA agent is responsible to file and the account has to pay but the ultimate responsibility is yours to file. If there is a history of owing taxes, the account may be responsible for filing estimated taxes on a quarterly basis. I hold three MLP's in my IRA:RNF, CLNT and NGL. I also hold a few dividend paying stocks including NZTCY, PGH, HUN, FCX, GLO and KYE. KYE is interesting as it is a non-diversified closed end fund that invests in the energy sector [mostly MLP's] but generates dividends and has no K-1 distributions. Ed
thanks for the response but you have added a new wrinkle which I was not aware of and no other poster alluded to. While you state that MLPs can be in IRAs, which is consisent with the other posters and my belief, you indicate that ove the $1000 UBI threshold, there may be a tax liability even in a IRA. I was not aware of that. I assume that tax liability only applies to UBI and not distributions. So one is OK on a distribution standpoint andneed to insurethatthe UBI is less than $1000. Then all is well. I'll be honest, I have never heard of the IRA manager having a tax liability and athe abillity to take money from my IRA. I don't like that at all.
P S I am awae ofthe adantages of a closed end fund as I own KYN. But doesn't have the yield of some of the MLPs such as Rnf, Lgcy and LINE as well as others. But again,thanks for your resonse
You can, it is just not the best place for them.
Putting a tax shelter inside a tax shelter is a waste of a perfectly good tax shelter.
And then there is the question of UBTI recapture when you sell your units which as of today is a controversial topic but may not be by the time you sell.
If you have funds in taxable and tax deferred then the taxable account is the place to put it unless you really want to avoid the tax forms.
I think you are mistaken when you sell your shares you will be in for a heavy tax bite the Roth IRA shields you from this.But as you say then there could be Ubita tax but still less then the tax when you sell
I struggled with that question last year. after speaking to my accountant she said buying MLPs in an IRA is fine. So I had my taxes done this year and she said the UBTI had no effect. UBTI is the unrelated business taxable income that could affect your taxes. I have multiple MLPs in my IRA and it hasn't cost me a dime so far and the yields are excellent.
thanks, the confirms my understanding. And one advantage is puting MLPs, etc in an IRA avoidds the adverse K 1 tax consequences. wish the uninformed, the guy who told me that it was not proper, would shut up if they don't know the facts. Anyway,thanks again
Mine are in a Roth IRA but this will be the first tax year for it.
I also have been holding NGLS which is a MLP in the same account for several years, not a peep from the IRS or tax adviser about it.
thanks a lot, you confirmed my understanding. I thought the guy who advised me was werong but could not prove it. I sure wish the uninformed would not state things they do not know about. But anyway thanks and I will consider mlps for my ira even though one does lose some of the advantages taxwise.