MLP IRA Tax Treatment - It's Possible, Just Follow These Rules

Investors should be aware of special tax considerations when holding an doing an MLP IRA investment combination. Since an MLP is already structured with special tax provisions, there are special restrictions on holding them in tax-sheltered accounts.

Because dividends in an IRA account are not taxed (generally), income investors often seek to house high yield investments in their IRA while housing capital appreciation growth investments in a taxable account. However, with the MLP (and check with your account or financial adviser since tax laws change and are subject to interpretation), the prevailing understanding is that distributions in an IRA are considered unrelated business taxable income (UBTI) and they create a tax liability when they exceed $1000 in a given tax year. For smaller investors, exceeding the $1000 may not be a concern but for high net worth investors it's an important distinction.

However, there are other vehicles which have alternative considerations even for high net worth investors.

Learn more on MLP ETN Investing and other tax-advantaged high yield vehicles: MLP ETF (ETN)

Real Estate Investment Trusts (REITs)

High Yield ETFs

Return from MLP IRA Tax Treatment to MLP Investments