| | | Yeah, I'm not sure exactly how it works as well.
And UBTI is the issue in the tax advantaged accounts. Since the custodian prepares the 990T, the owner should make sure the custodian uses UBTO loss carryforward in any year (sell or no sell) where there is UBTI income above $1,000.
In a regular account, I think UBTI is not an issue. Box 1 Business Income may be an issue in a regular account, and the owner of the account needs to carry forward Box 1 Business Losses (if any) from previous years to offset current year Box 1 Business Income (Or let Turbo Tax do this for you if you begin the current year with the previous year's TT output). When you sell ALL your position in a regular account, the K-1 will take everything into account and tell you what to report. I think!
I also think this crap is so complicated that the IRS is highly unlikely to challenge anything that you report in regard to MLPs, because they also don't have an easy way to know if you're reporting correctly or incorrectly.
After learning a bit about MLPs and tax reporting I think the decision to allow regular individuals to invest in publicly traded MLPs is a stupid idea, because I think a huge percentage are likely reporting their taxes incorrectly, and also the IRS doesn't have much of a clue as to who is doing it right and who is doing it wrong. It's waaaaay too complex. |
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