Paul, i know exactly what you're talking about. i would not screw around with this if it were small positions.
i now own a number of LPs, but they are all sizeable positions so i can justify either screwing with the K-1's myself or paying my accountant to do so. i made this decision earlier this year. i decided there would be a learning curve, but it shouldn't be so bad after the first year.
NS and NSH i actually hold in an IRA. the income will be in excess of $1000, so i will owe the UBTI tax or whatever it's called. that is not so much a paperwork hassle as a matter of paying the tax out of an IRA (which i understand is possible, when the IRA is the limited partner--see below*).
in any case, the prospective rise in the unit values justifies the PITA factor for me. NSH alone was up 5% today.
re: paying UBTI tax in an IRA...
If my IRA's PTP investment does generate UBTI exceeding $1,000 do I have to pay the tax? How is it paid?
You do not pay any tax yourself: the IRA is the unitholder and therefore is the taxpayer. The custodian of the IRA will be responsible for filing an IRS Form 990T. The IRA's share of all PTP income and of the deductions connected with the production of that income (as well as the income and deduction from any other partnership investments) is netted and entered on line 5, "Income (loss) from partnerships and S corporations." The "specific deduction" of $1,000 is entered on line 33. The deduction is subtracted from the amount on line 5, and tax is paid (out of the IRA funds) on the result, at the corporate tax rate. A statement showing the IRA's share of the partnership's gross income, and of the partnership deductions directly connected with producing the income, should be attached to the return.
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