This is controversial, but strict interpretation of IRS rules is that if your net earnings after deductible expenses for all the MLPs in the account exceeds $1K, you are supposed to get a tax id number for the account and file a tax return for the UBTI (unrelated business taxable income).Some dispute that their income is UBTI.Small investors who keep income below $1K probably need not worry. But some account custodians are very vigorous about enforcement. Some threaten to pay the tax for you and then deduct it from your account.This is not a big deal if you are large enough to afford a tax advisor to fight for you before the IRS in an audit. But small investors probably cannot afford those expenses. Hence, other investments are more attractive.
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