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RLWEA
RLWEA, Accountant
Category: Tax
Satisfied Customers: 69
Experience:  I am an Enrolled Agent with the IRS for 25+ years. Thank you for allowing me to assist you!
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Recd K-1s (Form 1065) from publically traded partnerships

Resolved Question:

Rec'd K-1's (Form 1065) from publically traded partnerships that I own in my IRA. What must I report?
Submitted: 5 years ago via Cornell Legal Info Institute.
Category: Tax
Expert:  RLWEA replied 5 years ago.

RLWEA :

Hello,

RLWEA :

You do not need to report anything as long as they are all in your IRA account.

RLWEA :

There is a box on the K-1 Form that should be checked IRA, do you see that?

Customer:

Each one in Part II Line I states that the type of partner is IRA?SEP/KEOUGH thatsufficient? I do not see a box.

RLWEA :

Yes, Sir that is definitely sufficient! I forget sometimes that the software now just prints that out...what that means is that all three of those descrptions are different type of retirement accounts. So, again, you need report nothing. I would keep the Forms K-1 with your Tax Return, however the IRS does automatically see this code and does no matching.

Customer:

Someone told me that if UBTI exceeds $1,000 that it needs to be reported. Did not happen this time, but for future reference is that correct?

RLWEA :

Sir, I want to double check that before giving my response...will you wait a moment as I pull up my research program?

Customer:

Certainly

RLWEA :

I am sorry to keep you waiting.

RLWEA :

My understanding has always been that UBTI is taxed at the business level. With that said, obviously a Partnership passes through their income and losses, including UBTI, Before saying yes to your question, I wanted to double check that the IRS had not chnaged that. There is a caveat to this though,

RLWEA :

The investment income of these types of organizations generally is not taxed if it is set aside to be used for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. In addition, for a section 501(c)(9), 501(c)(17), or 501(c)(20) organization, investment income is generally not taxed if it is set aside to provide for the payment of life, sick, accident, or other benefits. However, income on any amounts set aside that exceed the qualified asset account limit, figured under Code section 419A, is unrelated business income. Special rules apply to the treatment of existing reserves for post-retirement medical or life insurance benefits. Income derived from an unrelated trade or business may not be set aside and therefore cannot be exempt function income. In addition, any income set aside and later spent for purposes other than those specified must be included in unrelated business taxable income.

RLWEA :

I felt it best if you read the caveat the way I was..literally.

RLWEA :

To give you an absolute answer, is that if it is reported on your Form K-1 and is over $1000, then yes it becomes taxable. Do you understand why?

RLWEA :

You realize that UBTI is Unrelated Business Income Tax for non-profits?

RLWEA :

Sorry, Unrelated Business Taxable Income...Oops!

Customer:

OK - Don't think that is at issue here. These are gas and oil entities and only one reported any UBTI and that was $27. Don't know where I came across it, but while waiting in the hold line for the IRS, I also saw a reference to a $1,000 deduction.

Customer:

Thank you for your help - more comfortable now that not reporting the K-1's is in fact correct.

RLWEA :

I am sorry, but off the top of my head I have no idea what the $1000 Deduction would be for.

RLWEA :

You are mor than welcome. That is what we are here for. I am so happy you feel more comfortable now.

RLWEA :

Have a Great Evening and thank you for allowing me to assist you.

Customer:

Sorry, I couldn't find my way back to where I saw that in a million years. It had something to do with submitting some kind of composite return.

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