Am I creating a future accounting/tax return nightmare by keeping a Limited Partnership stock paying large dividends in my SEP IRA?

AtlantaTaxExpert

Is the stock a publicly-traded equity, or is privately-held?

setexenv

It is a publicly traded stock...NuStar (NS)...

AtlantaTaxExpert

If it is publicly traded, then buying it as an equity in your SEP IRA portfolio perfectly legal with no "accounting nightmare" that are any worse than buying a mutual fund. The dividends will accrue in your IRA tax-deferred, and any increase in the stock will also be tax deferred.

The only real disadvantage is the fact that the stock, when sold at a profit, will NOT be eligible for favorable capital gains treatment. The profit will be taxed as ordinary income when distributed from the IRS.

IntlTax

I wonder if the LP will have any UBTI flowing up so that the IRA is subject to the unrelated business income tax.

AtlantaTaxExpert

On a publicly-traded stock??

IntlTax

Limited partnerships don't have stock. They have partnership interests.

AtlantaTaxExpert

Granted, but they are publicly traded, and it would seem that this is exclusively a for-profit limited partnership.

Is not UBTI an issue only in tax-exempt organizations, such as charitable remainder trusts or non-profit organizations like a 501c??

IntlTax

An IRA is a tax exempt entity.

AtlantaTaxExpert

Yes, the IRA for the stock owner IS an tax-exempt entity, but the limited partnership is NOT.