Message Font: Serif | Sans-Serif
No. of Recommendations: 2
I am interested in KPM because of its yield.

OK. I liked NFI for it's yield, too. Then it abruptly stopped paying and the price crashed. :-( Lesson learned. The hard way as usual.

My understanding is that the dividend is taxed at regular income tax rates.


First off, KMP is a partnership. It doesn't pay a dividend. It distributes it's earnings to it's partners. The partners (that would be you if you bought it) pay taxes on whatever the partnership earns whether those earnings are distributed or not

Depending on how the partnership earns money, you'll report interest, dividends, ordinary income, capital gains, and any other kind of income they generate.

Therefore, I would like to buy it for my IRA. However, I hear that they may be problematic. However, I cannot find specifics. Can anybody explain the consequences of holding KPM or other MLPs in an IRA (Traditional or Roth)?

I think others have covered that part pretty well. However I'll point out that it is quite possible for a limited partnership to generate the dreaded UBTI and not distribute cash. It's possible for the IRA to have to pay taxes, yet not get a distribution of cash with which to pay the tax.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.