I've just discovered that my IRA may be subject to "unrelated business income tax
" because of one and potentially two positions I recently bought. I'd never heard of this until I bumped into an article about it which said that investors often make the "mistake" of investing IRA money in MLPs and REITs, and if the "income" (sometimes the term "distribution
" is used) and/or "gain" exceed a certain amount (in a calendar year for "income", and presumably upon sale for "gain") it will be necessary to file additional forms
and pay "unrelated business tax
income". Further, the claim is that the money will AGAIN be taxed upon withdrawal from the IRA, so in addition to nuisance, there is double taxation
. I'm trying to decide whether to sell the positions I have in an MLP and a REIT and just invest money from my taxable account in the positions, since I do like them. I haven't made enough "income" (dividend
, that is) yet to trigger what I think is a $1,000 year "ceiling", but I do have a gain of just about $500 in one of them, at today's prices. Could someone please advise me on exactly how this works? If it applies to me, I'd like to get out without triggering anything...