990-T Tax Form - Do I owe taxes on CEQP/P dividends in my IRA account?

This is a great question about Unrelated Business Taxable Income (UBTI) in IRAs. Normally, investments in an IRA grow tax-deferred (traditional) or tax-free (Roth). However, certain investments can generate what's called UBTI, which is taxable even within an IRA. Master Limited Partnerships (MLPs) like CEQP/P often generate UBTI. If the UBTI in your IRA exceeds $1,000 for the tax year, your IRA custodian might need to file Form 990-T and pay taxes on that income. The good news is that typically your IRA custodian (the financial institution where you have your IRA) handles this filing for you and pays any taxes due from the IRA assets. You should check your IRA statements or contact your custodian to see if they filed a 990-T for your account. They would have received a Schedule K-1 from the MLP showing the UBTI amount. The loss from selling shares wouldn't offset the dividend income for UBTI purposes since they're treated separately.

Just went through this exact situation with my Fidelity IRA that held some MLPs. I used taxr.ai (https://taxr.ai) to confirm whether my dividends were actually generating UBTI. You upload your 1099s and investment docs, and it analyzes them to identify if you have potential UBTI issues. Saved me tons of research and confusion about my CEQP holdings. For me, it confirmed my custodian had handled everything correctly, but a friend found out his IRA custodian had missed filing a required 990-T. The tool shows you exactly what type of dividends you received and whether they're the kind that generate UBTI. Really helpful for untangling MLP tax stuff in retirement accounts.

I was really skeptical about using any third-party service for tax document analysis, but after struggling to get clear answers from my broker about UBTI in my IRA, I tried taxr.ai. Surprisingly helpful - it confirmed my MLP investments (including some CEQP units) were indeed generating reportable UBTI above the threshold. The report showed exactly which distributions counted as UBTI and which didn't. I took this info back to my broker who then confirmed they had missed filing the 990-T! They're now amending things on their end. Without having that specific information, I'd still be getting the runaround from customer service reps who didn't understand the issue.

For anyone dealing with IRS issues related to 990-T filings or UBTI questions, I had massive issues getting through to someone who could actually help. After 4 hours on hold over 3 days, I used Claimyr (https://claimyr.com) to get a callback from the IRS. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c I needed clarification on whether my custodian or I was responsible for addressing a missed 990-T filing for my IRA's MLP investments. Within 2 hours of using Claimyr, I was talking to an actual IRS agent who specialized in exempt organization filings. They confirmed my custodian was responsible and gave me specific documentation to send them to prove it.

I need to apologize for my skeptical comment earlier. After waiting on hold with the IRS for over 3 hours trying to get clarity on a 990-T issue with my IRA, I broke down and tried Claimyr out of desperation. It actually worked exactly as described. Got a callback within about 90 minutes, and they connected me directly to an IRS agent who understood exempt organization tax issues. The agent confirmed my suspicions that my IRA custodian had messed up and gave me specific instructions on how to get them to fix it. Saved me from potentially paying penalties for something that wasn't my responsibility. Worth every penny just for the time saved and stress reduction.

Another thing to consider - some brokerages charge an additional fee for filing 990-T forms for your IRA. I have accounts at both Fidelity and Schwab, and they each handle it differently. Fidelity charges $75 for each 990-T they have to file, while Schwab charges $25. Might be worth checking if Vanguard has a fee too before investing in more MLPs in your retirement accounts.

Just a personal data point - I had about $2400 in CEQP/P dividends in my IRA last year and my custodian (TD Ameritrade) filed the 990-T for me. They took about $320 from my IRA to pay the taxes. I didn't have to do anything except they sent me a copy of the filing for my records. I've since moved most of my MLP investments to my taxable account because even though there's more personal tax complexity, at least I don't lose part of my retirement savings to taxes before withdrawal.

I went through a similar situation with CEQP/P in my Roth IRA last year. The key thing to understand is that your $1,318 in dividends likely generated UBTI since CEQP/P is structured as a Master Limited Partnership. The $43 loss from selling shares won't offset the dividend income for UBTI purposes - they're treated separately. Since you're over the $1,000 UBTI threshold, your IRA custodian should have filed Form 990-T and paid taxes directly from your IRA assets. I'd recommend calling Vanguard specifically and asking to speak with someone about "UBTI and 990-T filings" for your IRA account. Regular customer service reps often don't understand these issues, so you might need to ask for a specialist. Also check if Vanguard charges a fee for 990-T filings - many custodians do. This might influence your future investment decisions about holding MLPs in retirement accounts versus taxable accounts.