990-T Triggered by Direct Transfer

We have a client that satisfied an RMD by transferring shares of publicly traded partnerships (EPD and PAA) from her IRA to her non-retirement account.  Unfortunately, this triggered UBTI and tax due per the 990-T.  It seems this transfer is being treated as though the shares were sold?  The 990-T could be correct, however, I was under the impression that doing a direct transfer would not trigger UBTI.  Any wisdom you can share is greatly appreciated.  Thank you!



I don’t think the distribution triggered the 990 T, which reflects UBTI generated within the IRA prior to distribution. If anything, the distribution would cut short the period of time that the IRA held these PTPs and reduce the amount of UBTI.

Is there anything left in the IRA to pay the 990 T taxes?

Hi Alan

This is from Fidelity’s web site on UBTI and IRAs

“Ordinary gains (MLPs only) generated from the liquidation of the partnership interest are 100% reportable as UBTI on Form 990-T”

When shares/units are transferred in-kind from the IRA to a taxable brokerage account, the value of the transfer should be the market value at the time of transfer, and this should become the basis of the MLP units after transfer. It would then seem logical that the gain in value would be income subject to UBTI, such that this amount along with any other realized income from any other MLPs, if greater than $1,000 would be subject to UBI tax, at trust rates, and if this is a TIRA, the money used from the IRA to pay the tax would be considered a taxable distribution. This happened to me several years ago in a Roth IRA. Lesson learned….don’t hold partnership units in an IRA.

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