Part of a CP2000 ("mini audit") I received from IRS is saying that they've received a K-1 showing dividend and interest income from a Powershares commodity ETF that I hold at a brokerage.
My understanding is that since I hold the ETF in an IRA, and since the K-1 shows no UBTI income (no code 'V' in box 20 of the K-1) that the income should not be taxable.
Is this correct, and what's the best way to convince IRS of this in my response to the AUR ?
Send a copy of the K-1 showing that the investment was held within the IRA. One of my clients had a similar problem a few years ago. The IRS didn't have the IRA checkbox entry in their records.
Ira Smilovitz, EA Leonia, NJ
I did this, sent my K-1 in. While accepting my argument on a separate larger and un-related issue in the original CP2000, they continued to say I owe taxes on the dividends and interest shown on the K-1.
To be clear: I hold shares of ticker DBC in a Roth IRA at my brokerage. The IRS says dividend and interest income was reported to them on a PTK-1 form Invesco DB. (Is PTK a "partners" K-1 ?) The K-1 that I have is indeed issued by Invesco. It shows the "partner" as being my Roth account ; box I2 ("is this partner a retirement plan ?") IS checked. The interest and dividend income (which the IRS says is taxable) is in Part III boxes 5 and 6a; these total somewhat less than the actual dividend I received, shown in box19 with code 'A'. Box20 has amounts coded 'A'. and 'B', but none with code 'V'.
If it is indeed correct that this interest and dividend income is not taxable, I seek suggestions on how to better make my argument with the IRS, in my response to the amended CP2000.
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