Have a Tax Question? Ask a Tax Expert
I hope this information is helpful to you. Thank you.
Thank you for allowing me to be of service to you regarding your tax question. Since an MLP is already structured with special tax provisions, there are special restrictions on holding them in tax-sheltered accounts. Because dividends in an IRA account are not taxed (generally), income investors often seek to house high yield investments in their IRA while housing capital appreciation growth investments in a taxable account. However, with the MLP, the prevailing understanding is that distributions in an IRA are considered unrelated business taxable income (UBTI) and they create a tax liability when they exceed $1000 in a given tax year. For smaller investors, exceeding the $1000 may not be a concern but for high net worth investors it's an important distinction.
Thank you for the quick reply. I can get out of the investments before the "distributions" exceed $1000, because I just bought them in February. However, I still have the question on how the gain will be treated. These investments have already increased in value: yesterday
s close showed a gain of $519.30 in the MLP and 458.49 in the REIT. This also brings in my question about the other one which is shown on the broker website as a "UIT" also. I have a loss in that one. Can I use the SUM of these? I mean, it's the ACCOUNT that is subject to tax, presumably it's the aggregate UBTI (or loss) for all holdings. If it helps, they are: LGCY (MLP), WSR (REIT), and GNI (the other "UIT"). Any further clarification you can give me would be much appreciated. Please advise, thank you.
The result of my research is that the $1,000 threshold pertains to the account.