I'm a bit new to investing and trying to understand the tax implications for holding LINE in a Roth IRA. I assume all gains and dividends are tax sheltered (since I'm investing money I've already paid taxes on) and there would be no need to fill out a K1. Is this correct? Will I be ZAPPED with massive taxes upon retirement on any/all gains/distributions even though I'm holding them in a Roth? When investing either LNCO or LINE in a Roth IRA, are there any tax differences between LINE and LNCO? Thanks in advance for helping a young investor!!
Owning MLPS in an IRA is confusing due to the chance for UBTI, and the fact that you may not be getting full tax advantage of owning an MLP. Add this to the Roth complication and you are going to get a lot of conflicting information. If you have not owned LINE for very long then I would suggest that you sell your LINE and buy LNCO (or BRY) in the Roth IRA. Chances are that you will not have much UBTI if any. You could see a tax accountant but the accountant may not know the correct answer either.
You only owe taxes if the total on LINE 20 (K1) is more than $1k. It will PROBABLY never happen. I own approx.10 mlps and the line 20 totals have never been over that amount in 5 years of retirement.
I repeat (something everyone seems to ignore) It's not the UBTI (necessarily - depends on the MLP) while you hold it, IT'S WHEN YOU SELL IT is when the potential problem arises. Topic has been covered here many times but too complicated to go into much detail.
have to talk to your tax guy / gal. UBTI is usually associated with LINE. LNCO is designed to not have K-1 reporting but is now trading at a premium istead of a discount. Depends on how much of this you hold and if you have loss generating MLP's to offset gain (UBTI) from LINE. Definitely need to talk to your tax person. If you don't have one and don't know the answers to the implications, then don't move forward until you do
So, I own 805 shares of LINN purchased at 31.75/share currently in my ROTH. I set up my monthly dividends to be automatically reinvested into new shares w/in my Roth. Until dividend changes, my current yearly dividend will be $2,333. Will I owe taxes on $1,333 of this amount? Also, what about gains/share? Will I owe taxes once retired on any gains/share? Retirement for me is several decades away (Lord-willing). I expect that the share prices will be far more/share in 30 years! Will I be slammed with taxes on these gains?
you will only be taxed on the UBTI which is reported yearly. and only if the UBTI exceeds 1k in any year. in most cases the UBTI is fairly small or even negative but in the event it exceeds 1k a year then you have to pay tax on the part of the UBTI over 1k.
unless you have a large roth with a lot of LINE,there is no worry about holding it in a roth