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Hello:
I posted this to the NCN board but have received no response so I am putting it here:

My due diligence on Canadian royalty trusts as an income stream leads me to believe they might be unclear as a viable IRA holding: the foreign tax withholding, depletion rules, return of capital stipulations (or lack thereof), K1. My tax man is not knowledgeable - by his own admission. My online broker telephone rep not helpful. We are all sorta in the dark.

If you have further information, I would be much obliged if you would share. I have read Yahoo message boards already.

Thank you very much,
Sheila O
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Hello Sheila,

Do not put Canadian Royalty Trusts in an IRA.

At best you receive no credit for foreign taxes paid, return of capital,and depletion to offset income from trusts. If you held the trust outside the IRA your returns would be substantially higher due to these credits or deductions.

At worst, you would also have to file and pay tax for UBRI, Unrelated Business Income.(I am unsure about third letter in acronym.) I can provide more details if you still intend to put trust in IRA.

Also, it might prove expensive to find an IRA custodian who would allow Trust in IRA. The typical broker or bank would refuse.
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Hello WP

I can provide more details if you still intend to put trust in IRA.

Also, it might prove expensive to find an IRA custodian who would allow Trust in IRA. The typical broker or bank would refuse.


Yes, more details please.

I have already put SJT in my Roth some months ago via Waterhouse online; it was not problem.

I was interested in Canadian trusts because in that country oil trusts are able to add to the holdings of the trust, or so I understand. In theory it might then be perpetual.

Thank you for responding.
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Sorry for my confusion on Unrelated Business Income Tax(UBIT). It applys to partnership income including master limited partnerships (MLPs) traded on Amex. Royalty trusts, although they typically natural resource entities reporting on K-1 similar to , do not produce partnership income.
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