unrelated business taxable income
I was surprised this year when my broker withdrew money from my ira and sent it with form 990-T
I have questions re: this program.
I have 3 MLP’s of which 2 had positive UBTI the other negative.
The broker lumped the 2 positives together took a single $1000.00 deduction when calculating the tax.
Should they be treated separately?
If lumped why not include the negative MLP as offset?
My tax identification was not included in form 990-T so how can I report the tax paid on my 2014 1040?
I understand this stealth tax on IRA’s is the law unfortunately but I want to minimize the tax and also get credit for tax paid.
By the way whenever I withdraw the MLP from the IRA it will again be taxed as ordinary income.
Sure looks like double taxation to me but what do I know?
Permalink Submitted by Jose Morales on Wed, 2014-10-29 15:59
Your IRA reports the UBTI and pays any tax due, not you. It is an important distinction. You cannot pay the tax on behalf of your IRA and get the tax credit on your personal income tax filing.
Permalink Submitted by IAN BROWN on Wed, 2014-10-29 19:18
Thanks for that distinction which is kind of strange as it seems my IRA is disconnected from me. As far as the reporting that the broker does I assume the IRS ignores the negative UBTI MLP.
Permalink Submitted by mk foss on Wed, 2014-10-29 22:25
Form 990-T is required to be filed when UBI exceeds $1,000. All of the investments showing UBI should be considered, in addition, losses from UB activities from prior years can also offset the UBTI. The K-1s are not sent to the custodian responsible for filing the returns, they’re sent to the owner of the account. I’d suggest that you make sure all of the current year and prior year K-1 schedules are forwarded to the custodian and inquire if they will be preparing an amended return.
Permalink Submitted by IAN BROWN on Thu, 2014-10-30 21:21
That is very interesting. It does seem logical that negative UBI should be included. I shall have to revisit my K-1’s.
Permalink Submitted by Alan - IRA critic on Wed, 2014-10-29 22:42
And your 1040 is unaffected whether a 990 T is filed or not. There is some question whether negative UBTI for a different holding can be netted against positive UBTI. I don’t know whether the IRS has clarified that or not.
Permalink Submitted by IAN BROWN on Thu, 2014-10-30 21:26
This 990T form for 2013 is new to me. Do you know when this process was created?I would have thought many other taxpayers would have run into this issue but perhaps it is a recent phenomenon.
Permalink Submitted by Alan - IRA critic on Thu, 2014-10-30 22:40
Same rules for several years, although taxpayers may have been ignoring their K 1, since they do not apply to IRAs except for the box that shows UBIT.
Permalink Submitted by mk foss on Fri, 2014-10-31 03:19
If the IRA is invested in publicly traded partnerships that generate UBI – the losses from one year can only offset income in a subsequent year (a) for the same partnership or (b) when the publicly traded partnership is sold. Losses from other investments generating UBI can be carried over and offset future UBI from any source.