Distribution from partnership which is inside an IRA

[bgiez]

Got a phone call from a financial advisor for one of my clients. He said there were significant distributions on the partnership inside this client's IRA. He said he thought there was a limit on the amount of distributions allowed when the p-ship is inside an IRA. Has anyone heard of this, or does anyone have an idea where to look or search terms to use? I am clueless about this.

Thanks for any help.

[Koss]

Partnership

I have not heard of such a limit. It is a curious coincidence that your question is closely related, but not the same, as the issue raised by Arlo, in the post titled "Need help on K-1 rollover."

My question is: In your case, what is the impact on the taxpayer? Why would it matter if there was a limit? If the distribution is from the partnership to the IRA, and the IRA is not distributing money to the taxpayer, then there is no taxable event.

Would we want the tax code to limit the amount of dividends from individual stocks in an IRA, or the amount of capital gain distributions from a mutual fund held by an IRA?

Why is a partnership different?

BMK

[thomtax]

I get a notice from Charles Schwab each year that if the distributions from partnerships inside IRAs exceed $1000 ( I think), then they must be notified of the amount since there must be a payment made by them to the IRS. I don't know all the details, since I do not have this amount, but I do know there is a procedure there.

LT

[thomtax]

Why is a partnership different?

BMK

Don't know why, but it is. All the investment advisers say do not put MLPs into a retirement account because of the tax situation.

bigiez, probably a good place to start would be with the tax department of the brokerage house - not the local office. They can give you info and possibly where to look at details.

LT

[bgiez]

well, I googled the terms in my post subject line and

found this: http://www.fool.com/taxes/2000/taxes000908.htm It's not dated, and I don't know about the accuracy, but from what it says, the only one who has to worry in this case is the IRA custodian, not the IRA owner. So I'll pass this along to the financial advisor. Guess I should have googled first, and posted later

[Koss]

Eye-opener: MLP in an IRA

I started researching this out of curiosity.

The client or financial advisor mentioned in the original post may be dealing with an MLP that is generating unrelated business income.

A retirement plan of any type (IRA, Roth IRA, 401(k), pension plan, etc.) is an exempt organization.



No, really. It is. Just like a hospital or a museum.

And the organization has more than $1000 in unrelated business income, then it has to file Form 990. But in the case of an IRA, that responsibility falls to the trustee, not to the individual taxpayer.

This is discussed in horrifying detail in IRS Publication 598.

For a more pedestrian, less technical discussion, see this article at The Motley Fool:

http://www.fool.com/taxes/2000/taxes000908.htm

BMK

[bgiez]

Thanks, BMK!

[oceanlovin'ea]

We are personally dealing with this issue. Although in the final end of the matter there is not $1000 of income.

Since my husband established an account at Scottrade and does his own manipulations on the account, Scottrade doesn't take care of the 990. We would have to do it.

I think he has since moved all the money from the MLP's.

Linda, EA