K-1 for PowerShares DBC Held in an IRA

Feb 17, 2011 6 Replies
D

I received a K-1 (Form 1065) from PowerShares DB Commodity Tracking Fund (DBC) for shares that are held in an IRA. Apparently, DBC is a partnership, and my IRA is a limited partner. On line F, the K-1 states that the partner is a ROLLOVER IRA, and on line I it says that the entity is an IRA/SEP/KEOGH, so they know that the account is an IRA.



Included with the K-1 is a summary of how to report the information on my tax return. E.g.,



Line 5: Interest Income. $29. Report on Form 1040, Line 8a.



Line 8: Net Short-Term Capital Gain (Loss). $23. Report on Form 1040, Schedule D, Line 5.



Etc. I'm confused by these instructions. I thought that what goes on inside of an IRA is of no concern to the IRS; only what goes in and out. Is that right? Can I just ignore the K-1 as far as filing my income taxes is concerned?



Dave


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A

DBC is organized as a publicly traded partnership. As at least 90% of its income is "qualifying income", it meets the exception to avoid taxation as a corporation. As such, anyone who owns shares is a ltd partner and receives a K-1. In your instance, the owner is an IRA and therefore can disregard any dividends, interest or capital gains.

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R

Obviously, in this case there won't be an issue as the reported income is well under $1,000, but how can you tell that the income is not UBTI?

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R

under $1,000, but how can you tell that the income is not UBTI?

See line 20-V of the K-1.

20V = Unrelated business taxable income
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A

under $1,000, but how can you tell that the income is not UBTI?

The structure of the fund is that it would never have unrelated business income.

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R

Thank you. I have had IRA holdings with UBTI, but never enough to be taxable. I couldn't recall the nature of the K1.

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