How did you Handle the Sale of KMP in an IRA?

So, as of now, I actually had to ask Scottrade to do my 990T’s for me. When I asked them if I had to do it, they refused to answer me. They told me it was my problem. I called 3 tax lawyers and they had no clue what the heck I was talking about. The IRS was of no help. So I called Scottrade all morning, only to be told there is nothing they could do for me. Finally, I called someone e at the branch, and they asked for me. He told me that the girl told him that they would not answer my questions, but they would fill out the papers if I told them to. So, I did. Hopefully, they will fill it all out and be done. This has been one mentally bad week. I just want to get some of these things behind me and move forward. It is amazing how life’s little problems seem to pile up all at once. Hopefully, everyone else is doing fine this week. Well, enjoy the rest of the week. Hopefully, the weekend will bring better times over here. I am going to try to collect the rent from one of my tenants. She is ignoring me and won’t answer the phone. She is due 2 months rent. I think she is going to rip me on this. We will see.

Keep cranking,

Robert the DividendDreamer

This is really the only thing I can say about this at this point because I have so very little knowledge of the subject. I called the IRS, and they did not have much info for me. Any help would be greatly appreciated.

1. Do I just ignore the K1 if the UBTI is below $1000. Mine are all negative.

2 How do you handle the capital gains on the sale. Do you just let it go because it is in an IRA?

Any thoughts would be greatly appreciated.

Keep cranking,

Robert the DividendDreamer 

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About dividenddreamer

Doing what I can to make the best of today and the most of tomorrow.
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12 Responses to How did you Handle the Sale of KMP in an IRA?

  1. TwoInvesting says:

    I own KMI so don’t have first hand experience with K-1s. However, I found a few articles listed below that seem to indicate that you’ll only owe taxes if the UBTI is above $1000. Since it is in an IRA, you don’t owe any taxes on the capital gains, as you would if held in a taxable account.

    I’m not a tax professional though, so I’d double check this information.
    http://seekingalpha.com/article/2392375-mlps-yes-theyre-okay-in-your-ira-and-other-tax-questions-answered
    http://www.investingdaily.com/21003/kinder-consequences-a-question-of-timing/

    • Thanks so much.

      I have read all the articles, but some say one thing and some say another. I called the IRS, and they had no clue. Imagine the IRS has no clue. Unreal. Well, I called the National Association of Master Limited Partnerships, and they say of the UBTI is below 1000, then do not worry about it. They also say forget about the cap gains. I am going to keep plugging at it, but I am really confused at the moment. Thanks for the input. If you hear anything, drop me a line.

      Keep cranking,

      Robert the DividendDreamer

  2. TwoInvesting says:

    If I find anything I’ll let you know. I won’t have to deal with K-1s until tax time next year as I file that paperwork for my recent purchase of KKR.

    It’s funny because usually they say not to put MLPs into a tax-free account (because of their inherent tax-advantaged nature and the possible taxes owed on the UBTI). However, in your case, you’ll likely make out well because the per unit capital gains taxes that most people will owe don’t apply in your case.

    When I consider myself a smart guy and still don’t understand all the taxes, something needs to change with our tax code. I guess if you get audited in the future you can point to your communication with the IRS not knowing what to do either!

    Best of luck!

    • I have Scottrade on the line. If I told you what they said, you would think I am lying.

      I asked them if I had to file the 990T. They said they can’t tell me. However, I am kind of tight with someone over there. They told me that although they cannot tell me if I should do it, they have to do it if I request it to be done. I do not have to do anything. However, I have to pay to have it done from my IRA accounts. I am going there now. I will post more when I am done.

      Keep cranking,

      Robert the DividendDreamer

  3. Vivianne says:

    This is the first time I’ve heard anything about 990T. It’s cool to read your blog to learn about all sort of things.

    • I will give you a little advice for the future. If you are going to buy a REIT or an MLP, do not put them in an IRA. It is not worth it. Just buy them in an open account. That is my take on that subject. Then you do not have to worry about the 990T. Thanks for stopping by.

      Keep cranking,

      Robert the DividendDreamer

      • TwoInvesting says:

        Robert,

        MLPs generally shouldn’t belong in an IRA. However, it is very beneficial to have REITs in an IRA. http://www.dividend.com/dividend-education/the-complete-guide-to-reit-taxes/

      • That appears to be the case from the article. Either way, I will only be holding stocks from corporations that pay dividends only-no more return of capital. I cannot control what or when they decide to change practices. So, I feel that only dividend yielding stocks are for me at this time. It has been quite a mess dealing with having to file a tax return for each IRA, and yet, I still do not know if it is going to be completely correct.

        http://www.investopedia.com/articles/pf/08/reit-tax.asp

        This article sheds a little light on a REIT and the return of capital that can trigger such an issue. Everything is great as long as you do not sell Tha assets. However, if they are held for years, then the return of capital can create quite a tax issue.

        Thanks for stopping by.

        Keep cranking,

        Robert the DividendDreamer

  4. doug says:

    Robert,

    I’m not a tax accountant, but you should only need to file a 990T if the UBTI income on the KMP K-1 is greater than $1000. I’ve bought and sold MLP in my Roth IRA without the need to ever file a 990T, because the MLP generated very little UBTI. The MLP’s can be a better investment vehicle in a taxable account, since they generated very little taxable income until you sell the MLP partnership. They are great for collecting the distributions in retirement, and letting your heir take care of the cost basis. ,Also, you might want to try contacting Kinder Morgan (check the investor section on their corporate website), because I know some publicly traded MLP often provide tax assistance to their partners.

    This is a decent article written by a tax professional that gives good insight into the tax issues related with owning an MLP. http://www.cohenfund.com/a-practical-guide-to-the-tax-issues-of-investing-in-master-limited-partnerships-1

    • So how do you handle the potential capital gains and the ordinary income that is generated upon sale of the stock. I have not gotten a clear answer, so I chose to file regardless in an attempt to do the right thing. Not even the IRS had an answer for me. I have asked that same thing directly to many people who have no answer. I want to know exactly what and where the numbers go or if they are not dealt with at all. I still have no clear answer, so I went with it. I was planning on dying with the shares, however, Richard Kinder had other plans.

      Thanks for the help and for stopping by.

      Keep cranking,

      Robert the DividendDreamer

      • TwoInvesting says:

        Robert,

        I believe this article addresses your concern regarding potential capital gains.

        From near the end of the article:
        “What about when an investment that generated UBTI is sold? Suppose, an IRA has a substantial investment in master limited partnerships that generated a few thousand dollars of UBTI each year. The IRA sells the MLPs at a gain. Is the capital gain UBTI? No. Only the business income generated by an investment is UBTI. Any capital gains from selling that investment are not UBTI.”

      • The UBTI is negative, so I think we are in the clear as far as the IRA goes. I appreciate the help. It is really cool to have other people on the look out for things such as this. It really makes things easier with multiple eyes on the subject. Thanks so much.

        Keep cranking,

        Robert the DividendDreamer

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