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3 Energy MLPs for the Price of One

It's true that UBTI (unrelated business taxable income) can trigger a tax event even in an IRA, but most MLP's operate at a UBTI loss. This is due to thier unique structure and business. Your payment is paid out of cash flow before expenses and is therefore not a dividend (which are paid out of profits). MLP's write down thier profits through depreciation of thier assets, which is usually covers all thier profits. So in a normal operating environment you, as a partner in the MLP, will not have a positive UBTI. However, there may be times when a large windfall occurs which cannot be entirely covered by asset depreciation in which case you might owe taxes.