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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 266438  
Subject: Re: MLPS Date: 11/15/2012 2:20 PM
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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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