A very common organization for oil and gas partnerships these days is the multi-level partnership (MLP). As I understand it, MLPs distribute their income out to the "unit holders" (limited partners) and generate a Schedule K-1 for use on the limited partner's tax return. My question is what happens when K-1 income is received into an IRA? Is tax deferred on that income as it is for capital gains and qualified dividend income?
Multi Level Partnerships (MLPs) in an IRA / Schedule K-1 Income in an IRA
Oct 20, 2008
7 Replies
Ingeneral there is no tax effect.
In rare cases a hoilding might generate Unrelated Taxable Business Income. If your IRAs generate over $1000 of UBTI/year the custodian should calcuate the tax due on that income and pay it out of the IRA.
And charge you out of the IRA for handling the paperwork.
Would UTBI be a rare thing for an oil and gas partnership?
If I recall correctly, these K-1's come in with the custodian's tax I.D. number on them, so the taxpayer does not have to report anything. Just check the K-1 when it comes in to see if your social security number appears on it.
Speaking strictly from what I hear, UBI seems quite common in IRA-held MLP's, although I don't recall any specific comments regarding oil & gas. It's rare that there's enough of it to require a 990T.
MLP is Master Limited Partnership. Many of these are PTPs (Publicly Traded Partnership).
FYI,
MLP is an initialism for Master Limited Partnership; not, Multi Level Partnership..
Maybe a confusion with multi-level marketing (MLM) .
Katie in San Diego
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