Taxes on certain IRA income
I was talking to a cpa about taxes on IRA and she mentioned that certain income generating activities in IRAs can generate taxable income, for example Limited partnerships can create taxable income. I am wondering if there is a good resource that shows some of these activities? Specifically I am wondering if options trading in the stock market can generate taxable income?
Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2021-02-08 18:06
Options trading within the IRA guidelines would not trigger any current taxation. However, the CPA was likely referring to UBTI (unrelated business taxable income). If such income exceeds 1000, the taxpayer will receive a K 1 for the IRA showing the UBTI, and these are often generated by holding limited parterships, often oil and gas related in the IRA. The IRA then needs to file a 990 T and pay the higher UBTI tax rates (generally trust tax rates) and pay the taxes directly from the IRA with the tax prep fees. Major IRA custodians will often prepare the 990 T for a reasonable fee. Also see UDFI per the following.
UBTI & UDFI Tax Considerations for Self-Directed IRA Investors (pacificpremiertrust.com)