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A few tidbits. You are allowed $1000 in UBTI income before it most be reported. Hence, MLPs can be ok for small investors.

Until you sell, that may be true. When you sell (which someone will be required to do within 10 years after your, or your spouse's, death, in order to fully distribute the IRA), then the recapture of the non-dividend distributions may trigger more than $1000 in UBTI, even if for small shareholders.

You are also permitted to deduct expenses from the gross payment to arrive at the taxable amount.

Expenses must also be documented on a 990-T, which would have needed to be filed by the administrator of the IRA, so if the expenses occurred in prior years, your IRA administrator would have had to file returns for those years.

Lots of trouble and paperwork for many. Probably not worth it.

Yes, we agree there. Not worth it at all, IMO. I fear that some of the IRA owners that purchased MLPs based on incomplete knowledge are going to have a rude and expensive awakening in the future.

AJ
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