I've been learning a lot about master limited partnerships (MLPs) lately. I have an IRA that has some units of an MLP. Thankfully this specific MLP doesn't produce year-to-year unrelated business taxable income (UBTI) as UBTI is taxed, even in an IRA for amounts that exceed $1000 per year. That is nice but, my MLP units do pay quarterly distributions that "adjust" my taxable cost-basis downwards relative to my "original" cost-basis. The difference between my "adjusted basis" and my "original basis" is something called "recapture" and, upon the sale of the MLP units, this "recapture" is subject to taxation, even in an IRA. However, it is my understanding that "recapture" is classified as UBTI. Thus, if one sells MLP units in an IRA, and the "recapture" is less than $1000, then there are no taxes due.Supposing that the above logic holds, could one use the following strategy to manage their IRA's tax liability: Sell units of the MLP that have a recapture liability of less than $1000. Then hastily re-purchase the same number of units, thereby resetting the "recapture" at $0.
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