Form 1065 K-1 IRA investment

[arlo]

I have never encountered this situation before so I need some help.
Client brought in a l065 Partnership K-1 from IRA Funds he has invested.
The partnership is shown as a L.P. Exempt Organization.
Shows Line 1 Business losss of $-1244
Interest Income $151
Short term Capital Gain $1417
Other Income $901
It states that all income is NON-Colorad. Have No idea what this means.
Instructions says it must be reported on clients tax return. If I do, he is going
to pay taxes. I thought IRA earnings are non reportable unless you have a distribution. .
My Question is why is the client getting a K-1 from an IRA investment he purchased
in August 2009 and still owned at the end of the year.
DO any of you see what I am overlooking?

[outwest]

This might be UBTI..

or unrelated business taxable income to the IRA. I saw one of these earlier in the year, and as I recall, it was taxable to the IRA and the IRA trustee needed to do the return, not the client.

In my case the trustee specialized in this kind of thing so no problem for me, your mileage may vary.

[Burke]

These are coming in all the time now for IRA accounts. Nothing is done with them on the TP return and it is very confusing to the client. IMO, they should be sent to the custodian, not the TP.

[KBTS]

I also saw my first one of these this year. Check out the recipient's tax info number on the K-1 and I think you will find it is the EIN of the IRA trustee. If so, your client has nothing to report. That was the case for me

[Lion]

Ira

Sometimes the K-1 is sent to your client as a courtesy and his IRA plan administrator already has a copy. If there is an entry for 20 V, then that is Unrelated Business Taxable Income. The IRA needs to file a return including that information. Usually that is done by the administrator. However, if your client has a very self-directed IRA and doesn't rely on a brokerage or formal organization to manage his IRA, just opens various investments himself; then the IRA return may be on your client's shoulders and ultimately on yours. Have your client check with his plan administrator to make sure they have the K-1 and that any necessary filing is being done for him.

[arlo]

Thanks every one. KBTS hit it on the head. The k-1 has the IDN of the partnership not the client. I do nothing YEA YEA

[Jesse]

I have seen quite a few of these. When they start to withdraw the funds will they be reported as an IRA distribution or will it need to be reported for each K-1 flow thru?

They can make the most straight forward tax return pretty "messy" if they will need to follow the K-1 reporting.

[taxxcpa]

K-1s on IRAs

K-1s are just like dividends and interest in an IRA--not taxable. The only taxable event is a withdrawal. I've been getting K-1s for some commodity-related ETFs in my IRA. Not every one who invests in these ETFs are IRA investors, so they send everyone the same kind of K-1 telling you that it is taxable, etc., but an IRA owner can ignore all that.

A lot of these investments would be such a pain in the neck to report if they were not in an IRA that it would cost more to get your tax return prepared than you could make on the investment unless you invested a large amount--not just $2000 or $ 3000 or even $ 10000.