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Old 10-06-2016, 05:34 PM
 
776 posts, read 790,034 times
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Vanguard Natural Resources (VNR). Its just about broke. I have 500 shares purchased at $30.00 a share. It is now at 0.610. We are down $15,000.
Is there any benefit to hold on to it while it goes broke? They have hired a company to possibly restructure debt, but its doubtful they will survive. They just missed a bond payment.

This was not our doing. Our broker is responsible for holding this. He's fired, fired, fired. Now the accounts are in our lap.

Obviously, I should dump it and take the loss. I'm just wondering if there is a benefit to holding on to it (can't lose much more)? Maybe the broker had some idea, knowledge or plan? We are no longer talking and I'm not sure how to find out if there is any advantage to waiting to see what happens.

Thanks,
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Old 10-06-2016, 07:00 PM
 
79 posts, read 89,865 times
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Sounds like you are about to become an Owner of Record. Im not at my desk but a quick search tells me they are a Master Limited Partnership. Google MLP , CODI and bankruptcy. not good for investors. Probably need to get with your CPA pronto.
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Old 10-06-2016, 09:09 PM
 
776 posts, read 790,034 times
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Thank you. It is in our IRA. I'm guessing there are tax consequences?
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Old 10-06-2016, 09:40 PM
 
79 posts, read 89,865 times
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MLP Investors May Suffer Tax Hit from Forgiven Debt - Income Investing - Barrons.com

im no cpa, but i trade the markets for a living. The one thing i do know is I dont hold MLP structured businesses long term. They really dont belong in IRAs unless they are paid very close attention to. Once i get to my desk in the morning i'll see what i can dig up on them. You should take this up with a CPA though. You may be on the hook for more than just your 15k in losses once those positions are closed.
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Old 10-07-2016, 02:43 AM
 
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yes , mlp's can be very dangerous because of that fact . forgiven debt can be taxable .
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Old 10-07-2016, 05:59 AM
 
Location: MMU->ABE->ATL->ASH
9,110 posts, read 17,051,421 times
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Quote:
Originally Posted by macyny View Post
Thank you. It is in our IRA. I'm guessing there are tax consequences?
No, Its just a Loss in the value of your IRA. (When your IRA eventually pays Tax, it's value will just be less).

If it were me I would dump it take the ~$250 that's left.

You could let it ride in hopes that it might come back, But it will probably go to zero,

It will stay on your statement for years, at a few dollars. Some Brokers will let you "Write it off for free" others charge you for it.
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Old 10-07-2016, 01:15 PM
 
776 posts, read 790,034 times
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It is in my Fidelity trading account. I can sell it myself. Maybe I should call Fidelity and ask their advise.
Thank you for the information.
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Old 10-07-2016, 03:54 PM
 
1,842 posts, read 1,472,874 times
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Quote:
Originally Posted by mathjak107 View Post
yes , mlp's can be very dangerous because of that fact . forgiven debt can be taxable .
It's not taxable in an IRA. It's not a deductible loss - that is, you can't "take" it ( bummer ) and nothing is taxable ( whew! ).

Hopefully, this is well under 1/10th of your IRA's total value.

This would have been hard to catch, since it fell pretty fast. If you are going to invest in single stocks, trusting the broker to keep an eye on stuff is a problem. Just a quick look on-line every week or so at a minimum is best.

As a part of a mutual fund ( diversified ) it wouldn't have caused much of a blip.

Last edited by IDtheftV; 10-07-2016 at 04:05 PM..
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Old 10-07-2016, 06:03 PM
 
70,847 posts, read 71,210,489 times
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Quote:
Originally Posted by IDtheftV View Post
It's not taxable in an IRA. It's not a deductible loss - that is, you can't "take" it ( bummer ) and nothing is taxable ( whew! ).

Hopefully, this is well under 1/10th of your IRA's total value.

This would have been hard to catch, since it fell pretty fast. If you are going to invest in single stocks, trusting the broker to keep an eye on stuff is a problem. Just a quick look on-line every week or so at a minimum is best.

As a part of a mutual fund ( diversified ) it wouldn't have caused much of a blip.

wrong ....., it is not what you don't know but what you think you know that aint so .

in general MLP'S in ira's risk having UBTI.

mlp's in an ira can be problematic as they are reported on a k1 . mlp's can be subject to UBTI or un-related business taxable income . this is income not related to the actual core business that the mlp does to earn its income and profits . this kind of income is disallowed in ira's from being tax deferred or in the case of roths tax free , this income has to be declared even when in an ira . they are split off a k1 held in an ira as a line item on the k1 and reported by the mlp as taxable income for that year,separate from the ira .

i am not versed in the accounting of it but there is a chance income from debt forgiveness may be a ubti item since it is not income generated in the regular manner of doing business . .

the link below explains it :

IRAs, 401(k)s, and other qualified retirement accounts are allowed to invest in MLPs the same as any other traded security. There is nothing in the federal tax code or pension laws that says they cannot. Before you add MLPs to your retirement account, however, there are some special considerations that you need to weigh carefully and discuss with a professional tax advisor.

First, remember that one reason many people buy MLPs is for the tax advantages — the tax-deferred distribution and the ability to offset taxable income passed through from the MLP with depreciation and other deductions. In a retirement account, however, the income is already tax-deferred, so the tax benefits of an MLP are, in a sense, “wasted.”

More importantly, contrary as it may seem, holding MLPs in a retirement account can result in the account owing tax.

Unrelated Business Income Tax
There is a concept in the tax code (I.R.C. 511-514) called “unrelated business income tax” (UBIT). Under the UBIT rules, tax-exempt organizations and retirement accounts must pay tax on their “unrelated business taxable income” (UBTI) – income from a business that is not related to their exempt purpose (a university operating a business that had nothing to do with education would be an example).

If your IRA invests in an MLP, it becomes a limited partner in that MLP, just as you would if you invested directly. Because an MLP, like all partnerships, is a pass-through entity (no tax paid by the partnership, all tax items flow through to the limited partners/shareholders, who pay tax on their share), the partners are treated by the tax code as if they are directly earning the MLP’s income. Thus, as a partner in the MLP, the IRA or other account is considered to be “earning” its share of the MLP’s business income. The MLP’s business is not related to the retirement account’s tax-exempt purpose; therefore the IRA’s share of the MLP’s income is treated as UBTI and is taxed accordingly.

http://www.mlpassociation.org/mlp-10...nt-accounts-2/

Last edited by mathjak107; 10-07-2016 at 06:31 PM..
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Old 10-07-2016, 08:10 PM
 
1,842 posts, read 1,472,874 times
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Quote:
Originally Posted by mathjak107 View Post
wrong ....., it is not what you don't know but what you think you know that aint so .
Cute.

First of all, the investment in the MLP is $15k and the threshold for the income tax trigger is $1k. Is the OP going to owe anything? Not likely ( but possible ).

Secondly, suppose, there is $1,001 in UBTI loss. The capital loss of the $15k is included in the calculation and the UBTI goes to zero. Your link talks about this.

If the entity keeps operating and debt is restructured, then what you warn about can happen, but it sounds like it's all over but the shouting for Vanguard Natural Resources.

Also, I guess if the partnership does go bankrupt, the debt holders could go after the partners ( the IRA(s) ), but there are a buttload of partners with holdings in the hundreds of thousands of shares. Are they going after macyny with their 500 shares? Not likely.

The law is meant for IRAs that control stuff being able to unfairly compete with taxable entities such as self-directed retirement accounts. This is a passive investment. There is a lot of chatter from investment rags like your link or seeking alpha or fool, but that comes from the IRS's focus on Unrelated Debt-financed Income. It's not the same thing.

Find me something on irs.gov on UBTI from forgiven debt and then you'll have something. It's still unlikely that the 500 shares will trigger anything.

There's nothing preventing an overzealous IRS agent from making a "ruling" but that's not a court ruling and still subject to the calculation mentioned above.

BTW, if someone has to pay tax in an IRA due to UBTI, it's not deductible, but not relevant to all this.
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