I've avoided holding Master Limited Partnerships (MLPs) in my taxable brokerage accounts since I don't want to deal with the tax complexities. But in an IRA (in my case ROTH), my understanding is that the Roth IRA will completely shield you from ever having to read a K-1. Is that true? Because then I saw this article:
which talks about a restructuring of a particular company that forced a tax event for its MLP units, even those that were held in IRAs. It mentions:
When owners use IRA funds to invest in partnerships, as opposed to stocks, bonds, and funds, they owe tax on certain annual income from the partnership exceeding $1,000 because of an antiabuse provision. This levy is known as Unrelated Business Income Tax, or UBIT
I guess my question can best be broken up in parts:
a) Is UBIT (Unrelated Business Income Tax) the only tax-related item for investors holding MLPs in their IRAs to be conscious of?
b) Is the UBIT tax only triggered by a one-time event such as the MLP being bought out or rolled up into the parent, or are your yearly MLP distributions subject to the $1000 limit? And is it $1000 per account or $1000 per MLP? (in other words you get $900 in distributions from MLP#1 and $200 from MLP#2 - are you subject to UBIT?)
c) Does your account broker (ie Schwab) do the paperwork for you and give you the bill (as the article seems to imply), or do you yourself need to understand the K-1?