Hi,
I have a K-1 from a PTP that was held in a rollover IRA. The shares in the PTP were purchased by, and entirely liquidated from, the IRA in
2009. There was a net loss on the investment. The K-1 does show that the IRA is/was the owner of the shares.
I realize that this would not be subject to the passive activity rules if held by an individual, and would therefore be deductible. However, what is the effect since the shares were held in the IRA? Technically, I don't think it is a "fully taxable transaction" because the individual owner is not yet receiving distributions from the IRA, and therefore not in a taxable situation. But as of yet I cannot find a definitive answer on what the individual and/or IRA would do with this reported loss.
So... does the taxpayer get to deduct the loss on his individual return, even though no distributions were made from the IRA? Or does the taxpayer sit on the K-1, using the loss to either adjust his total "basis" in the IRA, and then take the deduction as an offset from income 30+ years from now when he finally takes distributions from the IRA? Or something else entirely that I'm missing?
(As a side note, the IRA is not invested in any other PTPs, so there isn't any other PTP income to use this loss as an offset for UBTI or anything along those lines.)
Any thoughts on the treatment for this would be greatly appreciated!
Kimberly