for about 50% profit in price..in my ira. I recently discovered that it has and will have in the future...ubti problems. Got my a while back and all of it's income is ubti. Box 20v equals box 1 and there apparently are no deductions in 13J or 20T1.
" it is income to the mlp from sources unrelated to its direct business."
I already explained that is not what it means. It is income unrelated to the business of your IRA.
To take a clearer example...consider a charitable tax exempt organization not subject to tax. That organization decides to open a store selling cookies. The income from that is considered UBTI and so is subject to tax.
Similarly, income from petroleum refining is not the central business of your tax advantages IRA account, so any such income when it exceeds certain thresholds becomes liable for tax. The read this happens is that you are not a stockholder collecting dividends, you are a partner in the underlying business and YOU earn your portion of income from refining operations. It's like you purchase a refinery in your IRA.
It should be obvious, the income is not unrelated to CLMT. It is income unrelated to the purpose of your IRA.
" I use Turbo Tax Deluxe for my taxes. I have several MLPs in my IRA. I just enter the data from the K=1s."
Why on earth are you doing that? You can't mix up your personal tax return and your IRA.
The K-1s for MLPs in your IRA do not go into Turbotax.
No more than any stock trades made in your IRA do on your schedule D.
If you need to pay UBTI in your IRA, that is a whole separate thing that Turbotax does not support. Turbotax knows nothing about UBTI.
Thanks for the discussion. I use Turbo Tax Deluxe for my taxes. I have several MLPs in my IRA. I just enter the data from the K=1s. So far I have not had to pay any additional tax because of the UTBI. (Actually it seems to have reduced them a little. I do the K1s last.) I understand that upon selling the positions, the UTBI may increase for that MLP in that tax year. One question I have is Are the taxes determined on the total plus/minus of the UTBI? Meaning do the minus UTBI offset some of the positive UTBI. I cannot tell while I'm making the entires, but I imagine that is true. Another question is Are particular MLPs types, such as Upstream, Pipeline, Downstream Distributuin, etc, more prone to having UTBI or is it just MLP specific? Thanks for any insight in advance.
Sentiment: Strong Buy
google is your friend:
Unrelated Business Taxable Income
So, what is UBTI anyway? The concept of UBTI pre-dates IRAs – it was originally developed in relation to charitable organizations, trusts, and other tax-exempt entities. The IRS developed this concept to ensure that tax-exempt organizations didn’t have a competitive advantage over taxable organizations, such as for-profit corporations. The way that income is determined to be “unrelated” is by checking these two tests:
Is the income from a trade or business that is regularly carried on?
Is the trade or business unrelated to the tax-exempt entity’s exercise of the entity’s tax-exempt purpose?
If these two tests are met, then the income may be UBTI. Here’s an example that may help you to better understand the concept of UBTI (taken from IRS Publication 598:
An exempt vocational school operates a handicraft shop that sells articles made by students in their regular courses of instruction. The students are paid a percentage of the sales price. In addition, the shop sells products made by local residents who make articles at home according to the shop’s specifications. The shop manager periodically inspects the articles during their manufacture to ensure that they meet desired standards of style and quality. Although many local participants are former students of the school, any qualified person may participate in the program. The sale of articles made by students does not constitute an unrelated trade or business, but the sale of products made by local residents is an unrelated trade or business and is subject to unrelated business income tax.
The concept of UBTI covers many more situations, and you can find out much more about other types of activities that can generate UBTI by going to IRS Publication 598.
".no..it is my understanding that ubti is income to the mlp that is directly unrelated TO THEIR BUSINESS"
well, your understanding is wrong, sorry. There's plenty of information on the internet. No so hard to look this stuff up. For example, google the definition of UBTI - here's what investopeadia says:
"Definition of 'Unrelated Business Taxable Income - UBTI'
Income regularly generated by a tax-exempt entity by means of taxable activities."
See, the IRA is the tax exempt entity in this case. Clearly CLMT is not a tax exempt entity.
You already commented that all of CLMT income was UBTI - that should tell you your understanding was wrong. You are saying they made all their money from some side business and none from actual refinery operations?
UBTI problems? Can you explain what you mean by that? I've been following $CLMT closely and haven't heard any news of the sort. Anyway it had a nice bounce back today, It's looking like most of the sellers from the recent run-up have left the building.
Sentiment: Strong Buy
It is my understanding that ubti is unrelated business taxable income..that is, it is income to the mlp from sources unrelated to its direct business..and may be taxable in an IRA account it the mlp is held there and, I believe, if the sum of the ubti's across all mlp's you hold in the IRA...that have positive ubti's, tallies to $1000 or more. Anyone..correct me if i am wrong.
I feel guilty if I convinced you to sell CLMT in your IRA, even though I agree it shouldn't be hld in an IRA. So my suggestion about IRAs and MLPs - you can buy quite a few C Corporations that are partners in MLPs, and get some good investments and avoid any UBTI exposure. KMR and EEQ are taxed as corporations that own equivalent share-for-share units in KMP and EEP. LNCO is a C Corp that owns equivalent units in LINE. TRGP is the corporate GP in NGLS and XTXI is the corporate GP in XTEX. Credit Suisse likes both of them right now. KMI is the corporate GP in KMP. Each of these passes on the distributions it gets from the underlying MLP as dividends, and the UBTI issue goes away. I am sure there are others that I've forgotten.
And of course, if you like a particular area of energy, like the midwest refiners, there are regular C Corporations that operate similar businesses and pay good dividends, such as HFC.
to the poster below (more and more messages are becoming unreplyable to)::
"ETP is buying out GP ETE. I think LINE may be planning to buy up LNCO"
ETP is not buying out GP ETE (you apparently completely misunderstood the press release assuming you even read more than half the title)
It is total nonsense to suggest that LINE would buy LNCO.
LINE just created LNCO a few months ago as a financing vehicle.
Why on earth would they reverse that a matter of months later?
Don't feel guilty..you've done me a favor. Having to deal with ubti in an IRA would be a PAIN IN THE @&&...especially after talking with varous people at the brokerage I use (one of the largest) who told me they don't know what this is..or SPEAK to your tax advisor...like everyone has a tax advisor? Are you kidding me?
There seems to be a recent trend in which a number of MLPs are buying out the general partner. ETP is buying out GP ETE. I think LINE may be planning to buy up LNCO as well as one or two others I don't recall at the moment. Also, the general partners dividends are considerably lower than their MLPs. PSX is currently moving in the other direction by spinning off its pipeline business into an MLP via an upcoming IPO. Just all stuff that could gum up above plans to avoid the UBTI issue. If your UBTI is under $1,000, there are no consequences.