Know What Your Retirement Assets Are Invested In

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When a taxpayer invests their IRA, SEP-IRA or Simple-IRA in a limited partnership, a number of potential tax problems may arise of which the broker who sold you the investment may not be aware or may not have informed you.

When an IRA is invested in certain types of partnerships, including, but not limited to, oil and gas or real estate, those partnerships issue an IRS Form K-1 reflecting the items of income or loss allocated to the partner. This income is NOT reported as income on your 1040 because it is earned by the IRA. However, the income in these partnerships is often considered under the Internal Revenue Code to be a unique type of income known as unrelated business income or loss. When the result is unrelated business income loss, or is income greater than $1,000 the IRA’s trustee is required to file a special tax form known as Form 990-T.

If you receive a Schedule K-1 and the type of the partner (Line I1) is IRA or SIMPLE IRA this may be an issue that affects you. Because of the variations and complexities surrounding this issue we encourage our clients to call us to discuss the potential effects and how they apply to you.

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