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Author: seanroe13 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: MLP's in Roth IRA, Date: 3/11/2014 1:34 AM
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I just read an article on Morning Star not recommending holding MLP's in Roth IRA because of complicated tax reasons. I was thinking that that was the perfect place to have them and am looking for some other opinions before I make adjustments to my account. Any ideas?
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Author: TMFBigFrog Big red star, 1000 posts Old School Fool Home Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120428 of 121219
Subject: Re: MLP's in Roth IRA, Date: 3/11/2014 1:56 AM
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Hi seanroe13,

I just read an article on Morning Star not recommending holding MLP's in Roth IRA because of complicated tax reasons. I was thinking that that was the perfect place to have them and am looking for some other opinions before I make adjustments to my account. Any ideas?

The key incremental risk with MLPs in your IRA is something called "UBTI", Unrelated Business Taxable Income. If you own at least one partnership (like an MLP) in your IRA and the partnerships in your IRA generate at least $1,000 of UBTI attributed to the partnership units you own, your IRA has to pay taxes on that UBTI.

The IRS has a chapter on defining what is and isn't UBTI, here: http://www.irs.gov/publications/p598/ch04.html .

If you call investor relations or shareholder services of the partnership you're considering buying, you ought to be able to find out the partnership's history of generating UBTI. They probably can't offer you any guarantees on whether that historic trend will be maintained going forward, but at least that history can help you see the type of exposure existing investors have faced.

Regards,
-Chuck
Inside Value Home Fool

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Author: gsgreen Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120430 of 121219
Subject: Re: MLP's in Roth IRA, Date: 3/11/2014 9:38 AM
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I hold 8 MLPs in both a Roth and Traditional IRA. While my experience is certainly no guarantee of what yours may be, during the ten years I have held them, the annual cumulative UBTI has been negative. My broker, Schwab, tracks that negative accumulation on the theory that it may offset any future positive UBTI - I have NOT researched that theory, so if anyone has any knowledge there feel free to comment on it.

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Author: bk57 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120433 of 121219
Subject: Re: MLP's in Roth IRA, Date: 3/12/2014 2:25 PM
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huh. new one on me. i knew ubti could impact a regular ira but thought it would be fine for a roth ira. puzzling.

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