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UBTI and Canadian Royalty Trusts in qualified retirement plans


Guest Jarrett
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Guest Jarrett

I discovered this forum from a posting on ValueForum.com and wanted to ask an investment question. If I were to purchase shares of a publicly listed master limited partnership in either my IRA or SEP-IRA, I know that any UBTI over $1000 will become taxable. Does this same rule apply to foreign owned trusts such as the Canadian Royalty Trusts?

Thanks

James Jarrett

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Why would you refer to a Canadian Royalty Trust as being an MLP? What does your prior purchase of MLPs have to do with CRTs?

While there are a few CRTs that are listed on NYSE etc, the question that mbozek posed still remains the problem. Is there a Custodian who will accept this for an IRA?

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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If the Canadian Royalty Trust is purchased in a US exempt trust (like an IRA)

AND

the product is debt-financed, then UBI would result (subject to the $1,000 annual limit).

The product's disclosures should address suitability and discuss the UBIT issue (if debt financed). Hope this helps.

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I must be missing something here. How could money from the IRA be debt financed? Or did you mean the CRT? But if the CRT, isn't that always debt financed?

Can an IRA purchase securities or make investments etc that are not registered in the US, as are most CRTs?

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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An IRA can invest in foreign investments as long as the assets, e.g. the stock certificates, are held under a trust organized within the US. However, few custodians will handle non publicly traded or foreign securites because compliance issues under US securities laws, as well as annual valuation requirement for IRAs make it too expensive or too risky. Those custodians that accept odd assets charge high annual fees and limit their exposure.

mjb

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