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Did anyone here see the notice from Fidelity that they're going to start charging $300 per year in any account that holds an MLP? Wow!
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Where did you see that??...I just did a search of their fee schedule and could not find any mention of a fee for mlp....I have never received a notification....please post where you saw that....Thanks
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Possible phishing scheme?
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I saw the item on the Fidelity website. They have a q&a investment discussion board and that was one of the subjects discussed.

It was explained that any IRA or qualified account that exceeds the $1000 UBTI (unrelated taxable income) rule and hence requires the filing of a 990T tax return will be charged $300 for that filing by Fidelity.

Income from MLPs is UBTI and hence falls under the rule. But in previous discussions this was a controversial subject and some tax advisers dispute the rule. Others say you can deduct legitimate expenses from your UBTI gross number to arrive at the net figure.
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Interesting, I have never had a mlp in an IRA as I knew there were proplems. However, I don’t believe UBTI is the same number as the income you recieve from a mlp..I think the K1 you get lists the amount of ubti...you could look at your last years k1 and see what it lists..I will look at mine just to see..I still do not see that fee listed on there website under fees..I give them a call.
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I did find that is correct, starting in 2019 for 2018 income...did not find in on a search on their website, but just a google search.
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Did anyone here see the notice from Fidelity that they're going to start charging $300 per year in any account that holds an MLP? Wow!

Yes, it's true. They just announced it within the past couple of days.
Probably the reason is that the fed is stepping up their enforcement of UBIT in Tax sheltered accounts. It appears that profitable sales closing positions in an IRA will be considered UBIT and taxable over $1000.

Don't lose sight of the fact that an MLP is a tax sheltered investment, and it shouldn't be placed in a Tax Sheltered account in the first place. Investing an MLP in a tax sheltered acct loses many sheltered advantages for the investor.IMHO, It is best not to do it. It appears that Fidelity is also saying the same thing to alert investors of the potential (real) problem you will be exposed to.

Use this as a wake-up call from your broker, for you to take corrective action

b&w
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The high yields paid by MLPs is due to the partnership not paying income taxes. Hence, the info is passed onto the shareholder who then pays at his level. UBTI rules are intended to collect income taxes on those held in IRAs or other tax preferenced accounts.

The UBTI issue has been around for years and there are reports of brokers who threatened to file tax returns for accounts with UBTI excesses, but I have never heard that they actually filed. Merely a threat to get people to trim their MLPs or move them elsewhere.
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The high yields paid by MLPs is due to the partnership not paying income taxes. Hence, the info is passed onto the shareholder who then pays at his level.

The MLP distributions received in a taxable account are tax free.
The MLP distributions received in a tax sheltered account are fully taxable in a tax when the money is removed from the tax sheltered account. Every dollar removed from an IRA is 100% taxable because it was originally funded with un-taxed money. In addition there is no step-up in value at time of death. After 70 1/2 you have to start taking RMDs (required minimum distributions) And once you start and die your heirs have to continue based on their age and pay taxes on every Dollar. Securities in taxable accounts get stepped up to current value at time of death so there is no tax obligation for the heirs
In an IRA in addition to the above there is also the UBIT problem with MLPs.

b&w
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I am not sure that all mpl distributions in a taxable account are tax free...Much of the distribution as I understand reduces the tax basis...If you were to sell you would have to pay gains on the reduced basis....If you hold till death, under current law, I believe the basis is stepped up to current value of the mlp...which avoids the taxes on the reduced tax basis...
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Thank you b&w! I was certainly not aware MLPs were tax sheltered! I have had to handle several K-1s in the past for trading MLPs that showed up on a mechanical stock screen I used to use. It was pointless as the profits were never over $1000 anyway.

FC
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The MLP distributions received in a taxable account are tax free.

My experience is the distributions are reported on Schedule E, where you can deduct depreciation, oil depletion, and a wide variety of other things. So often no tax is due this year. However, you also reduce your cost basis. So ultimately your distribution is taxed at capital gains rates (assuming you manage to sell at a profit).
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I am not sure that all mpl distributions in a taxable account are tax free...Much of the distribution as I understand reduces the tax basis...If you were to sell you would have to pay gains on the reduced basis..

It appears from your statement that you are not familiar with a K-1 or if you had than you didn't understand it.
Distributions are listed on Line 19A of the K-1 There are 9 (nine) separate lines on the K-1 that are reportable on your tax return . NONE OF THOSE LINES ARE THE DISTRIBUTION LINE 19A.
You don't report your distributions to the IRS. An MLP is a pass-through investment You are a partner and not a shareholder Distributions are paid from Distributable cash flow and not from earnings. Distributable Cash Flow comes from depreciation of assets and other accounting items
An MLP is a Publicly traded "Master Limited Partnership" It is not a stock It is a Tax sheltered partnership You should read an MLP Primer BEFORE YOU BUY AN MLP.


Most of your post--I'm sorry to say+++++ is incorrect and misleading+++++

Here is a link to learn about MLPs (there are many others on google

http://www.merrilledge.com/publish/content/application/pdf/g...

MLPs have been the backbone of my investing for over 14 years. In has been very lucrative for me and many others. You should however get familiar with what they are and ask questions before you buy, That way you and others have a chance to learn

respectfully submitted
b&w
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My experience is the distributions are reported on Schedule E, where you can deduct depreciation, oil depletion, and a wide variety of other things. So often no tax is due this year. However, you also reduce your cost basis. So ultimately your distribution is taxed at capital gains rates (assuming you manage to sell at a profit)


Not exactly correct
Line #1 Ordinary Business income or (loss) is reported on Schedule E Part II Line 28
under Passive Income and Loss

It is the only item that is entered from the K-1 on Schedule E

Distributions are on Line 19A AND IS NOT REPORTED ON THE TAX RETURN

This is because as an Investor in an MLP you are a partner and not a shareholder all expenses and income are passed through to you. Good MLPs have high depreciation on their growing assets and that is a non-cash expense (accounting wise) so it leaves a large distributable cash flow to pay distributions. But all the accounting plus and minuses are kept track of and when you sell it all gets accounted for.In a taxable account, If you don't sell until you die it all goes to your heirs at the stepped up value as of the time you die. Your heirs can sell the next day and pay no taxes

In an IRA there is no step-up in value upon death and all non taxable distributions are taxable on removal from the IRA. Inherited IRA's require RMD's at any age of the recipient if you had started RMD's.

If you have an MLP that doesn't pay a distribution there could be a possibility you might have to pay taxes on the MLP's profits and losses even though you received no distributions. Remember the distribution received (if you receive one) has nothing to do with taxes and is tax free.
During the financial meltdown of 2008-9 and 2014-15 a number of weaker MLPs stopped their distributions and their debt declined in value drastically and the MLP's bought up millions of dollars of depressed debt at rock bottom prices $0.20 or $0.30 on the dollar. All that recaptured money became a taxable item to the mlp and was passed along to the unitholders who had to pay.

b&w
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