A friend had shares of KMP in a Pershing IRA account before the merger. We understand UBTI on the K-1 for operational numbers might be a tax impact. Friend sold her shares of KMP in open market about 3 months before merger of KMP to KMI was completed. Pershing is taking the position that part of gain on KMP sale (even in the open market and not part of the merger) is subject to UBTI surtax and plans to deduct cash from her Pershing IRA account next week. She has protested that other MLP sales (for KMP or other MLP) in open market were never treated like this for tax reporting on Form 990-T.
Have any of you experienced this new rule from Pershing or another clearing firm (on KMP or any MLP)? If Pershing is right about gain from sale of MLP in an IRA being subject to UBTI (and not just the UBTI amount on the K-1), then every MLP trade in an IRA with a gain since MLP's first were used would have been subject to same treatment. I spoke with the folks who do K-1 for KMP several times. They said Pershing is the only firm taking this weird position and do not know how sale of KMP units are suddenly subject to UBTI. Would appreciate any comments about your experience in this area as to whether your clearing firm is doing the same, not treating sale proceeds as partially subject to UBTI, etc Pershing takes the position they are always right and that nothing the friend has offered as an explanation seems to sway their stubborn and unexpected position.