Roger, clearly we differ about having to pay major recapture money as UBTI when selling in an IRA. I've never done it,nor, I bet, has anyone else here. But put that aside and let's assume that I agree with you. So what's my point? Well, as much as I enjoy the majority of your posts, I find so many of them with relevance to Linn to be negative. And that's all right, but in this instance re UBTI upon sale in an IRA (as if the IRS has a clue about what an IRA's trading looks like) you presumably intended the post to be helpful.. But why didn't you also write about the firemen as well as the fire? If an investor is proactive about having his broker declare Linn's UBTI losses (and they've been significant) on an annual 990-T, they can be cumulatively used against any UBTI gains for 20 years, even if there are Linn ownership gaps within that time span. But when I've posted about this advantage, you never registered an interest. (Perhaps there's more allure to being alarmist.) Anyway, as an example, for the years 2009 -2012 my wife has a cumulative -$36,000 UBTI for her 3K of Linn units and I've got -$88,000 UBTI for my 9K. I expect these sums to be a comfortable safety net against possible UBTI gains. But they'd have disappeared without an annual 990-T submission and a brief explanation for the IRS of what I'm doing. (The "how-to" came from two IRS 990-T specialists, though getting that deep into the system wasn't easy.) It's fine to holler, "Fire! Fire!" but let's not ignore the guys who can put it out.
I agree with most of your posts as you agree with most of mine, but yours (to me) gives out a mixed message. You declaim UBTI on most of your posts on some boards, but on others you say it does exist but if you keep spreadsheets and file a 990-T over the period of time you own them, you might be abe to reduce your liability. At least I try to be consistent with my posts and say that SOME MLPS MAY have UBTI upon sale, and that as an owner won't have a clue to how much it is until you sell it.
I venture to say that not one in a thousand people who own MLPs in an IRA file a 990-T. I admire your continued efforts to have folks do that. But just because your experience in Linn hasn't generated significant UBTI (yet), there are other MLPs that MAY generate a lot of UBTI and I consider it useful to make people aware of it.
Roger, I don't understand what the following means: "You declaim UBTI on most of your posts on some boards, but on others you say it does exist . . . ." Is "declaim" the word you want?
But on the point you make that some companies have significant UBTI you're absolutely correct. So for anyone considering placing a fair amount of MLP investments in an IRA, they'd be wise to do some research and avoid high UBIT expenses. For instance, Vanguard was a killer in 2011 & 2010, though I don't know about 2012. I certainly wouldn't have it in an IRA.
Off of the roger topic, but sticking with UBTI tax declaration. Im in Linn for 3 years now and accumulating in my IRA. I have essentially ignored the UBTI on my taxes up until now. I have a decent UBTI loss shown this year and want to include in my taxes for future offset. If i include UBTI losses this year, will there be questions from IRS why i didnt declare in previous years that i owned LINN? Im assuming no as the previous years UBTI were losses as well and would not have triggered any taxes due?
dancingbear!!! UBTI has not a thing to do with your tax return. If you did owe tax on UBTI either annual or when you sell your IRA Custodian takes care of it. A MLP is better and more efficient in a taxable account. With 8 MLP K1 in 2012 i had either or negative UTBI. I had one MLP NRP a Coal royality stock that was heavy with UTBI and i sold it.
No. The IRS doesn't care if you're not taking advantage. Basically they barely care at all about MLPs in IRAs, which accounts for the lack of IRA-specific tax laws re MLPs in IRAs. There are WAY bigger fish to fry on the UBTI front than IRA-held MLPs. (And I'm not making this up.) In any case I doubt that your brokerage even knows about preserving losses in 990-Ts, which means you'll have to do your own 990-T and possibly convince someone there to send it in with their signature. I wrote a two-part post on March 11 explaining how to fill out what lines on the 990-T. That could be your template. Mostly it'll be replete with zeroes because the 990-T is such an all-purpose form. That's why you should attach an explanation of what you're doing even if it seems redundant.