Comments on: Increasing Dividend Yield Part V: MLPs *

By: George

George — Sun, 18 Apr 2010 02:23:02 +0000

“Apparently MLP income IS taxable even in a 401k,IRA etc. But only if the total income from all your MLPs is more than $1500.”

It’s UBTI (unrelated business income) that gets you in trouble with MLPs in an IRA. You could have unlimited income from an MLP provided the UBTI doesn’t exceed the threshold (my memory says $1k, but who trusts their memory?)

If you trade MLPs, like I seem to do, the accounting gets even worse for tax basis. Using an ETF certainly is an attractive alternative…

By: D4L

D4L — Fri, 09 Apr 2010 23:39:10 +0000

vr: I am where you are. I can’t justify the hassles given the amount of work required. I don’t think most investors are properly handling the multiple state taxes associated with investing in MLPs.

Best Wishes,
D4L

By: vr

vr — Fri, 09 Apr 2010 18:09:29 +0000

I did invest in one MLP last year and I wouldn’t do it again despite about 65% profit (dividends plus share price growth). K-1 is not for average Joe. TurboTax automatically took my numbers but after verifying the forms it appears that not all of them filled correctly. I had to twist TurboTax a bit to make it as it should. And I am still confused about 5 states where I have to file non-resident forms.

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By: harold

harold — Fri, 02 Apr 2010 18:48:25 +0000

Man avoid mlp’s where possible expecially in ira”s.If you want to invest in MLP’s do it with something like the fmo closed end fund and etf’s. They are a bookkeeping nightmare.

By: Ross

Ross — Fri, 02 Apr 2010 02:50:33 +0000

I have 3 MLPs in my rollover IRA. My last K-1 comes in on March 19. I’ve done my taxes twice on TurboTax which shows you what info it needs…I looked at the form only after TurboTax filled it out.

Apparently MLP income IS taxable even in a 401k,IRA etc. But only if the total income from all your MLPs is more than $1500. I think I Googled “tax MLP IRA” and came to the above conclusion after an hour or so.

By: arbles

arbles — Thu, 01 Apr 2010 13:04:19 +0000

Checking with a “tax professional”: that is what scares me about MLPs.

1. I don’t have one, and if I did, then I would need them only for this one issue.

2. In reading about them elsewhere, one individual commented that he had asked his tax preparer about them, and the response was that if the investor put money into them, then the tax preparer would be charging more money (and the hint was it would be a lot more).

After I had asked my question above, I found one article about MLPs that came out and stated that they would NOT be a good idea for an IRA. They didn’t go into any detail but to suggest that it had something to with MLPs already avoiding some taxes. That doesn’t make sense to me. The worst it should be is neutral (i.e. no benefit at all for the MLP units to be owned by the IRA).

I guess I could try it on a small scale for a year or two and see what the tax implications (both $$ and forms to be filed) are in owning.

Thanks for the good article and the response.

By: D4L

D4L — Thu, 01 Apr 2010 11:53:37 +0000

arbles: I am not a tax expert (far from it), but my understanding is that certain investments that receive preferential tax treatment are immediately taxed in an IRA if the earnings reach a certain level ($1,000?). Check with your tax professional before investing.

Best Wishes,
D4L

By: Rellif

Rellif — Thu, 01 Apr 2010 02:00:29 +0000

Works well in an IRA