OldNavySailor

Master Limited Partnerships: An Island of Stability for Dividend Investors

Beware fellow investors!

If you hold MLP's or LP's in a tax deferred account such as an IRA, you may be liable for paying the evil UBTI tax (Unrealized Business Taxable Income). If the sum total of UBTI across your MLP/LP investments exceeds $1,000.00, you will have to pay tax even though you did not sell the stock. You will have to apply for a tax id and the process is not simple to comply with the tax code.

Look at section "V" (usually) on your K-1. Many companies show a negative value, but some are positive. For details see page 2 of IRS publication 598, "Tax on Unrelated Business Income of Tax Exempt Organizations".