Roth IRA accounts are supposed to generate tax free returns at retirement. That is why they are extremely popular. Investors use Roth IRA accounts to accumulate a portfolio of stocks, which can generate Tax free income at retirement. One of investment strategy is to develop a portfolio of high dividend yielding stocks in Roth IRA that provide growing dividend cashflows to live on and potential capital gains. oil pipeline stocks provide a very reliable high dividend cash flow, but they are structured as Master Limited Partnerships (MLP) and therefore taxed as Unrelated business Income Tax (UBIT). The IRS requires the custodian of the brokerage account to file the return (Form 990-T) and the custodian pays tax from the brokerage account draining the IRA.
The dilemma for the retirees is to determine whether to hold this MLP in Roth IRA and pay tax on the income from MLP or reshuffle portfolio by selling MLP and investing in ETF or C corps, thereby avoiding tax but getting less dividend cashflow at retirement.