Schedule K-1 for a fund in IRA - to be reported?

[NotSoFair]

Hello all,

Happy Thanksgiving!!

I received a Schedule K-1 (directly from the partnership, not from the IRA broker) for a fund that is in my IRA. I haven't made any distributions from my IRA. Is the amount in K-1 to be reported as Capital gain/loss on my taxes?

Thanks.

[mwcpa]

this does not get reported as income on your 1040, but, when an IRA or other "tax exempts" invest in partnerships they may be subject to a tax on unrelated business income. see form 990-T... look at the K-1, you will see a disclosure related to this....

[NotSoFair]

Thank you for clearing that up.

[mwcpa]

from IRS publication 598 ( www.irs.gov/publications/p598/index.html )

"the following are subject to the tax on unrelated business income.... Individual retirement arrangements (IRAs), including traditional IRAs, Roth IRAs, Coverdell IRAs, simplified employee pensions (SEP-IRAs), and savings incentive match plans for employees (SIMPLE IRAs)."

Any tax comes into play (or at least a required reporting is due) when "gross receipts" exceed $1,000 from unrelated activities for the year.... the K-1 should report the gross receipts to you.

[NotSoFair]

It is less than $1000.

Thanks.

[mwcpa]

look for Box 20(V) and the footnotes to the K-1 to see what the actual "gross" income may be... it's not the numbers reported on the other lines.... those generally report "net"

"Code V. Unrelated business taxable income. The partnership will report any information you need to figure unrelated business taxable income under section 512(a)(1) (but excluding any modifications required by paragraphs (8) through (15) of section 512(b)) for a partner that is a tax-exempt organization" www.irs.gov/pub/irs-pdf/i1065sk1.pdf

In many cases one K-1 may not taint your IRA, but if you have a number of them you may have an issue.... the tax is not K-1 by K-1, but they are all added up.... and many stock brokers who peddle this never ever explain the possible tax cost to an investor of IRA or other pension funds, the tax guy finds out about it at the 11th hour (or two, three, four years later) and is blamed for the result (or the IRS is blamed) of poor advise from the know it all stock broker (been there too many times).

[NotSoFair]

I've only one K-1.

Thanks.