We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Non-Tech : UAN - The variable distribution MLP that could go a long way
UAN 78.94-0.8%Nov 26 1:00 PM EST

 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: diegosan who wrote (251)10/13/2021 2:53:07 PM
From: Area51  Read Replies (1) of 309
It doesn't seem right but it seems to me that UBTI income will be taxed significantly higher in an IRA than it is a non-taxable account (certainly for amounts over 13K but less than 500K for married joint filers in a tax year). Consider the UDFI capital gains tax: In a taxable account I think you will be subject to long term capital gains tax (15% up to about 400K depending on your marital status etcetera, and then 20%) although a significant portion of the gain may be taxed as ordinary income (still only 24% for married filers to 326K) whereas the IRA will be taxed at 37% over 13K of capital gain, and then it will be taxed again as ordinary income when you or your heirs withdraw it.

And I'm not even sure that Elroy is right that on death you will get a step up in basis (Do MLP shares even in a taxable account get a stepped up cost basis on death? Perhaps not. And although the IRS may be lenient on not auditing those that do step up their cost basis in this circumstance, the IRA trustee may be a stickler and do the calculation more conservatively).

Decent article from someone that understands all this better than I do:

Good Luck, A51
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext