Roth IRA, meet K-1 Tax Form

March 11, 2011 4:17 AM

Tax Filter: Do I have to report earnings from a K-1 tax form if the profits were made in my Roth IRA account?

I know YANAAccountant...I filed my taxes early in February, and just received a K-1 form for holding Plains All American, an oil transport/holding company, in my Roth IRA account. I bought it and have just let it sit, so if there are tax penalties for holding things less than a year or whatever, they shouldn't apply. I don't have tons of money in it. It does pay about 6% in dividends.

I purchased this in my Roth specifically to avoid taxes. Do I have to report it? If I do have to go back and report it, I used Turbotax this year. Is the ammendment process pretty easy there?

Thank you so much for your help.

posted by shortyJBot to Work & Money (4 answers total)

IANYA and it been awhile since I've done taxes. It depends but you might be subject to UBTI. I believe if you have over $1000 of income from that partnership in an IRA you will have to report it or some part of it.
posted by Busmick at 6:12 AM on March 11, 2011

Also not an accountant and I'm not particularly familiar with these rules, but I believe the "ordinary income" value rather than capital increases or other figures on your K-1, needs to be over $1000 for it to be UBTI.
posted by burnmp3s at 7:33 AM on March 11, 2011

For more info do a search on "UBTI in an IRA" or "MLP in an IRA" and you will find a ton of stuff. The issue is the partnership passes through income (i.e. doesnt pay taxes like a corp.) and then you holding it in an IRA means you dont pay taxes; so the government doesnt like this and makes you pick up the income. There are minimums to be reached so it might not be an issue as i said above and your broker might actually fill out the forms if you need it but each case is specific so you should call your broker or do some research.
posted by Busmick at 7:53 AM on March 11, 2011

Thanks, guys! I have round about $1000 invested in PAA total, and the earnings are much less than that. I think I'll try to get back into Turbotax and ask an operator there. If anyone has a specific situation like this with less than $200 earnings in total, I'd love to hear how it worked out for you.
posted by shortyJBot at 7:59 AM on March 11, 2011